Freemasons’ lodge fees not VAT exemptby
The United Grand Lodge of England (UGLE) is the governing body for most English and Welsh Freemasons. UGLE had previously charged VAT on its membership fees, but later made two refund claims covering June 2010 to March 2018 on the basis that the fees were in fact exempt income.
Certain not-for-profit organisations which provide qualifying services can treat their supplies as exempt from VAT, if the aims or the organisation are of a ‘philosophical, philanthropic or civic’ (PPC) nature.
The UGLE claimed that the aims of the Freemasons did qualify as PPC under Article 132(1) of the Principal VAT Directive and under Group 9 of Schedule 9 VATA 1994, and thus their income was exempt from VAT .
HMRC disagreed and UGLE took their case to the first tier tribunal (TC08250).
HMRC’s argument was that while they agreed that UGLE’s aims included those of a PPC nature, these were not its sole aims and, regardless, these aims were not in the public domain.
UGLE countered that its aims were purely philosophical or, failing that, were at least of a PPC nature with no aims falling outside that categorisation.
This wasn’t the first time UGLE had appeared before the tax tribunals. An earlier case in 2014 (TC03302) had also focussed on whether UGLE’s aims were of a PPC nature, which was argued at both the FTT and the upper tribunal (UT).
The FTT had concluded, and the UT agreed, that while much of UGLE’s aims were PPC in nature, they also had aims outside this categorisation, such as social and self-improvement. The FTT went on to conclude that these further aims were not ancillary to the main aims and were aims in and of themselves.
UGLE sought to differentiate this new FTT hearing from the previous one by demonstrating that their recent activities were more focused on community projects and similar.
In brief, Article 132(1) of the Principal VAT Directive exempts from VAT the supply of services, and closely linked goods, by a non-profit organisation to its members in exchange for a subscription fee. The organisation must have aims of a political, trade-union, religious, patriotic, philosophical, philanthropic or civic nature. Further, the end result must not distort competition.
Item 1 Group 9 Schedule 9 VATA 1994 uses very similar wording.
The tribunal agreed that there would be no distortion of competition if exemption was granted.
The FTT then considered whether UGLE had a single aim or multiple aims and whether these all fell within the aims described in Article 132. Their thought process was that if UGLE had any number of main aims, all falling within the listed headings, then it would follow that it was making exempt supplies. However, if UGLE had main aims outside the headings, then the exemption would not be available.
The FTT considered the evidence of several Freemasons and concluded that, due to the rituals central to the organisation, philosophy was a main aim of the Freemasons. So far so good.
HMRC accepted that one of the aims of the Freemasons was to provide relief to good causes, via either time or donations. Where these good causes were all external to the Freemasons, these would therefore be philanthropic aims. However, they were not.
The FTT found that during the period, four main charities were supported by the Freemasons, and all four were either intended to help Freemasons (or their dependants) alone or, at the very least, to help them in priority to non-Masons.
UGLE argued that the split of Masons/non-Masons supported had shifted in favour of the non-Masons. However, the fact remained that even once this shift had occurred, around 50% of the people who benefitted from the Masonic relief were themselves either Masons or closely related to Masons. UGLE therefore had a main aim which was not philanthropic and was outside the exemption.
The FTT having thus found a main aim which did not meet the criteria for exemption concluded they did not need to look at the remaining aims any further, because as mentioned above any aim found to be outside Article 132 was sufficient to prevent the exemption of the supply.
That said, the FTT also determined UGLE did not have a main Civic aim.
UGLE’s main aims were not wholly within the list set out in Article 132, therefore their supplies were not exempt. The appeal was dismissed.
The FTT noted that the Freemasons, and so UGLE, certainly had noble aims and that they were helping those who needed help and promoting important social aspects. However, as many of the people who benefitted from this help were themselves Freemasons, the help could not be said to be philanthropic and therefore could not benefit from the exemption.