The Upper Tribunal found Greenisland Football Club was wrong to issue a zero-rating certificate for its new clubhouse, but it had a reasonable excuse for doing so.
This VAT tribunal case was certainly one of the most dramatic of 2018. It reminded me of an entertaining football match where the lead keeps changing and the outcome is eventually settled by a winning goal in injury time. Which is apt because the case involved an appeal by HMRC against a football club (HMRC v GFC  UKUT 0440 TCC).
Greenisland Football Club is a charity in Northern Ireland, which issued a zero-rating certificate to the builder of its new clubhouse back in 2014. HMRC issued a penalty against the charity for issuing an incorrect certificate, the amount of the penalty being the same as if the builder had charged 20% VAT on his services.
HMRC’s argument was that the structure of the football club meant that the new clubhouse building did not qualify as a ‘village hall or similar’ and it was not ‘used by a charity for charitable activities’, because there was a membership system in place which came within the definition of business.
Half-time lead for taxpayer
As I reported in March 2018, the FTT allowed the charity’s appeal on two different counts:
- The clubhouse did qualify as a ‘village hall or similar’ because there was a clear intention for wide use of the building by the local community and not just by the football club.
- Even if the building use was not charitable, the taxpayer had a ‘reasonable excuse’ for issuing the certificate to the builder because the club secretary had consulted two professional people about the VAT position and had also read VAT Notice 708.
Second half comeback from HMRC
HMRC put forward three arguments in the UT as to why they considered that the FTT decision was flawed:
- The FTT had not clearly explained why the new building qualified as charitable and it had ignored important facts about the way the football club was organised.
The UT agreed, reducing the score to 2-1.
- The club was set up as a business because it was charging subscriptions to football players, and also earned annual income of £10,000 from an after-school club and £4,000 profit from a tuck shop.
The UT agreed, making the score 2-2.
- Having established that the building work should have been standard rated, it all hinged on whether the taxpayer had a ‘reasonable excuse’ for issuing the incorrect certificate to the builder. The UT was not prepared to override the decision of the FTT in favour of the taxpayer.
Final score: Taxpayer 3 HMRC 2.
The decision of HMRC to take this case to the UT shows a determination on the part of its policy team to challenge any zero rating on building projects where the charitable/village hall legislation is not completely met.
We saw a similar level of resilience in the case of Longridge on the Thames Rowing Club (EWCA Civ 930). In that case, HMRC lost its argument in both the FTT and UT about the club’s new ‘water sports hub’ before winning the day in the Court of Appeal.
The tribunal report about the structure of the club and the level of community use read very differently in the UT case report compared to that of the FTT.
The dominance of football compared to community use came across with much greater emphasis in the UT report. This highlights the importance of establishing the full facts of an arrangement when making a VAT decision.
Another learning point is that HMRC seems determined to challenge any charity with a specific sport in its title, rather than being described as, say, a ‘community centre’. It placed great emphasis on the fact that the football team was able to block all Saturday afternoons in the playing season for its matches ahead of other community users.
Perhaps the conclusion we can reach is that it is all about the charity’s name – game, set and match!
About Neil Warren
Neil Warren is an independent VAT consultant and author who worked for Customs and Excise for 14 years until 1997.