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Homeless charity takes fight to HMRC

8th Dec 2015
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The law firm Simmons & Simmons has announced it will support a homeless charity’s £1m VAT appeal case on a pro bono basis.

The Catholic charity Caritas Anchor House is fighting an unexpected £1m VAT bill for the construction of new facilities. HMRC levied the bill after the charity labelled its prospective facility as a “‘residential and life skills centre’ rather than a ‘homeless hostel’”. The tax authority decided that this left it subject to VAT.

Caritas Anchor House’s chief executive Keith Fernett said the decision was counter to 43 years of the charity’s arrangements with the tax authority, which allowed it to reclaim VAT. Fernett said the charity is being punished for using positive language to avoid the stigmatisation of its clients. “We believe we’re being unreasonably penalised for treating our clients with respect, and that HMRC is not taking a balanced view of the work we do.”

The decision has stymied the construction plans while the charity awaits the appeal decision. Simmons & Simmons will now fight Caritas Anchor House’s appeal under its ‘Access to Justice Scheme’, which helps ‘vulnerable individuals’ challenge a state decision. The law firm has instructed Sam Grodzinski QC, of Blackstone Chambers, who also appears pro bono.

“This situation poses a serious threat to their services which provide enormous benefits to society and the areas in which we work,” said Simmons & Simmons partner Nick Skerrett in a statement. “We fully support Caritas Anchor House in their appeal of this application.”

“We are truly grateful for the support from the team at Simmons & Simmons,” said Fernett. “To have such highly regarded and specialist expertise in this area representing our charity is such a reassurance to us and our hope of reaching a positive outcome.”

The Green Party’s London mayoral candidate Sian Berry is the latest to throw her weight behind the charity’s appeal. “I think the charity is quite right to appeal against the levy of an additional £1m in VAT,” she told the Wharf. “Aside from the fact that HMRC’s attitude seems unnecessarily heartless, in pure financial terms it makes no sense either: if we make it harder for charities to do what they do best and help the people most in need, the eventual cost in public services will be all the greater.”

HMRC said they do not comment on specific individual cases. It has previously indicated to AccountingWEB, however, that they were willing to work with the charity to resolve payment issues. “VAT status is a matter of law, determined by the nature and activities of the individual organisation.”

In the meantime, the charity’s fortunes are looking up: It received £300,000 today from the Big Lottery Fund to help homeless people find employment.

Replies (4)

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chips_at_mattersey
By Les Howard
08th Dec 2015 17:09

speaking for many AW regulars

We wish you well as you challenge HMRC. I will be following developments with interest.

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By Duggimon
09th Dec 2015 11:25

Surely can't fail

I can't imagine how this could go wrong. After all, if it were the other way around, that is to say, if a business called their latest development by some term other than what it was actually intended for simply to avoid paying VAT then HMRC would be all over them saying it doesn't matter what it's name is, the tax treatment follows the function.

That is of course quite correct but also means they are clearly in the wrong here, how can a homeless charity building a residential facility for those it helps be seen to be using it as anything other than a homeless shelter. It's disheartening in these times when HMRC is stretched so thinly with their numerous cutbacks to see them wasting time and effort on such frivolous cases, particularly one which no member of the public would ever support them in.

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By cheekychappy
09th Dec 2015 12:40

This is one of the many reasons the public don't have faith in the tax system.

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By dmmarler
09th Dec 2015 14:49

Well done Simmons & Simmons! But why?

The charity has done very well to receive assistance in challenging HMRC's decision, but how many more have fallen into this kind of trap who cannot get assistance to fight their corner?  It is standard practice to have some additional facilities with homeless hostel and similar accommodation to help people into work, etc.  It is an essential part of charitable activity and part of social housing.  The space this activity takes up compared to the actual accommodation for homeless people is negligible.  Now HMRC has made this decision it will want to dig its toes in (are we talking targets here?) and there will be an expensive and unnecessary fight. (This seems to be a similar case to the Hoylake Hospital Charitable Trusts case (2011) where HMRC tried to standard rate the kitchen and laundry for the hospital, but this was overturned on appeal.).

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