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VAT: Rowing with the tide

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Swanage Sea Rowing Club won its VAT case about zero-rating the building work on its new boathouse, much to Neil Warren’s surprise.

12th Feb 2021
Independent VAT Consultant
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It is well known that builder services supplied to a charity can be zero-rated if they relate to a new building that will be used solely for a relevant charitable purpose, eg a place of worship. To qualify the zero rating the building should not be used for any business supplies, only for the good causes and activities of the charity. There is a 5% de minimis exception for business use (VAT Notice 708, para 17.11).

A condition of zero-rating is that the charity must issue a certificate to the builder, meeting the conditions laid out in VAT Notice 708, section 18. HMRC can issue a 20% penalty to a charity if it issues an incorrect certificate. This is the same amount as the ‘lost VAT’ caused by incorrect zero-rating.

The case

The issue in the case of Swanage Sea Rowing Club (TC7904) was whether the new boathouse built to house its boats qualified for zero-rating.

HMRC said ‘no’ because the charity collected annual subscription fees and rowing session charges of about £8,000 per year, which was classed as business income.

The tribunal agreed with HMRC. The taxpayer claimed it had a ‘reasonable excuse’ for issuing a zero-rated certificate to the builder because it had discussed the VAT issues with HMRC’s Charity Helpline, and was convinced the work should be zero-rated. If this argument held, the penalty issued by HMRC should be withdrawn

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By Paul Crowley
12th Feb 2021 16:08

The one that got away
Based sole ly on a fishy phone call where charity talked about donations.

Still worth a punt for others to copy when they know full well that they are not entitled.

I am amazed that the call was justification.
Any business ever got away with no VAT based on HMRC unrecorded call?

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By Echo761
15th Feb 2021 11:06

A good example of legitimate expectation... but without the normal evidence. It highlights lack of good training for staff and anyone with experience remaining in HMRC.

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