Caithness Rugby Football Club
| Jurisdiction | UK Non-devolved |
| Judgment Date | 05 August 2015 |
| Neutral Citation | [2015] UKFTT 378 (TC) |
| Date | 05 August 2015 |
| Court | First-tier Tribunal (Tax Chamber) |
Judge Christopher Staker, Mr Leslie Brown
Philip Simpson QC, instructed by BBM Solicitors, appeared for the Appellant
Julius Komorowski, Advocate, instructed by the Office of the Advocate General for Scotland, appeared for the Respondents
Value added tax – Zero-rating – Construction by rugby club of a clubhouse on a sports ground – Whether intended for use “as a village hall or similarly in providing social or recreational facilities for a local community”– Value Added Tax Act 1994 (“VATA 1994”), Sch. 8, Grp. 5, item 2 and note (6)(b)– Appeal allowed.
The First-tier Tribunal (FTT) allowed the appeal against HMRC's decision that supplies made in the course of constructing a clubhouse were not zero-rated.
The Appellant Club was a registered charity and a members' club affiliated to the Scottish Rugby Union. It was not registered for VAT. It had a lease from the Highland Council, for a peppercorn rent, over land in Thurso. The playing fields used by the Club are on that land.
In about 2012, the Appellant embarked on a project to construct a new clubhouse on that land. Some £300,000 was required to build the clubhouse, of which half came from Sports Scotland. Other contributions came from the Robertson Trust, the Community Landfill Fund and the Caithness and North Sunderland Fund. The remaining £95,000 was raised by the Club. On applying for funding, support was given by other local sports clubs, which were potential users. As the clubhouse was being built, the Club realised that other community groups would benefit from using it. The clubhouse comprises four changing rooms occupying about half of the building, a main hall, a kitchen that doubles as a bar during functions and which can be shuttered off from the hall, and toilets. There is also an officials' room, a store room and a boiler room. The main hall, kitchen and toilets occupy about 40% of the building.
The constitution of the Club states that it provides a community benefit The clubhouse was an opportunity to better fulfil that aim.
The clubhouse is used extensively by the community. Approximately 85% of the use is by residents of Thurso or the surrounding area. A dance school meets at the clubhouse weekly. Boxercise classes take place weekly. A choir meets every Friday. A community association uses it most months for activities for pre-school children. Harriers use the clubhouse and one dressing room. A big band uses the clubhouse for practice. A disability sport association uses it weekly for bowling. The clubhouse is used for social events and fundraising events unconnected with the Appellant. If booked for a social event, such as an adult's birthday party, it is staffed by volunteers.
HMRC decided that the project was ineligible for zero-rating.
The Appellant claimed that zero-rating applied, because the clubhouse was intended to be used “as a village hall or similarly in providing social or recreational facilities for a local community”. The burden of proof was on the Appellant to establish on a balance of probabilities the intended use of the building. It is the intention at the time of construction that is material (para. 71 of the decision).
The FTT was satisfied that the funding applications did not demonstrate an intention at the time of construction to limit the use of the clubhouse by other groups, or to reserve the principal use of the clubhouse to the Appellant's activities. The FTT was satisfied on the evidence that the use of the clubhouse following its construction is consistent with what was intended at the time of construction, even if the actual use by other groups was not foreseeable in detail and may have significantly exceeded expectations (para. 76 of the decision).
One requirement of VATA 1994, Sch. 8, Grp. 5, note (6)(b) is that the building must be used in providing “social or recreational facilities”. To meet this requirement, the FTT held that it is sufficient that either social or recreational facilities are provided. A sporting facility is a recreational facility. Thus, even if the clubhouse were used only for rugby playing, it would still satisfy the definition of “social or recreational facilities”. However, the clubhouse was used for a variety of sporting, recreational and social activities (para. 78 of the decision).
A second requirement of note (6)(b) is that the facilities must be provided to a “local community”. The FTT accepted that where facilities are provided to people over too large an area, they are not provided to a “local community”. However, in a rural area, the size of a “local community” may be significantly larger than in an urban area. In a very remote and sparsely populated area, it may be larger. The evidence was that about 85% of the use of the clubhouse was by residents of Thurso or the immediate surrounding area. Some rugby teams travelled long distance to use the facilities, but sometimes this was to play against a team local to Thurso. The extent to which the clubhouse was used for matches between two teams, both of which have travelled from afar to play against each other in Thurso, was not explored by the FTT. In any event, the FTT held that minor use of facilities by persons from outside the local community does not stop the “local community” requirement from being met (para. 79 of the decision).
The remaining requirement of note (6)(b) is that the facilities must be used as a “village hall or similarly”. The FTT held that this requirement was also satisfied for the reasons listed in para. 81 of the decision, which include the following:
1) the clubhouse was used by a significant number of diverse community groups;
2) the clubhouse was constructed by and managed by a members' club on a non-commercial basis. The clubhouse was let out to other groups for modest rates, on the basis that users are responsible for the cleaning;
3) at the time of construction, the local town hall had ceased to be available for use as such, and the clubhouse had helped fill that gap;
4) the clubhouse is on council-owned land, which was rented to the Appellant for a peppercorn rent, as this saves the council the cost of maintaining the land, while ensuring that the land remains available for the Highland Games and other events unconnected to the Appellant; and
5) a sporting pavilion or clubhouse is capable of being used as a “village hall or similarly”.
Thus, the Club's appeal succeeded.
The decision in this type of case depends on the facts.
Much of the evidence concerned the use to which the building was put since it was constructed. HMRC claimed that the actual use of a building following its construction may not be the use that was intended at the time of construction. The FTT accepted this claim. However, the subsequent use of a building may be a factor to be considered when determining the intention at the time of construction. In particular, if a building has been used in a certain way from when it was built, this may strongly infer that this was the intended use at the time of construction, unless there is contrary evidence. When any building is constructed with an intended use as a village hall or similar, it is often impossible to know in advance exactly which groups will use it and to what extent. At the time of construction, there is often no more than a general intention that the building will be available for use by unspecified groups in the community. Arguably, the FTT's decision here is a victory for common sense.
[1] The Caithness Rugby Football Club (the “Appellant” or “Appellant club”) appeals against a decision of the Respondent (“HMRC”) dated 17 December 2013, upheld in a review decision dated April 2014, by which HMRC decided that supplies made in the course of construction of a clubhouse did not attract zero-rating.
[2] The Appellant contends that the supplies fall to be zero-rated for the reason that the building was intended to be used “as a village hall or similarly in providing social or recreational facilities for a local community”. HMRC disputes this.
[3] On the evidence, the Tribunal is satisfied on a balance of probability of the following background facts.
[4] The Appellant, a registered charity, is a members' club affiliated to the rules of the Scottish Rugby Union. It is not registered for VAT. The Appellant is the tenant of a lease granted by the Highland Council, for a peppercorn rent, over some 3.8 hectares of land in Thurso. The playing fields used by the club are located on this site. In about 2012, the Appellant embarked on a project to construct a new clubhouse on the grounds. In July 2013, the Appellant submitted a written request to HMRC to enquire whether the construction project would qualify for VAT zero-rating. In a letter dated 29 August 2013, HMRC responded they did not see scope for zero-rating save those works that suit the condition of disabled people. After further correspondence between the parties, HMRC advised the Appellant in a letter dated 17 December 2013 that the project would be ineligible for VAT zero-rating. That is the decision against which the Appellant now appeals. The Appellant requested a review of this decision, which HMRC upheld in a review decision dated 8 April 2014.
[5] Some £300,000 was required to build the clubhouse, of which 50% came from Sports Scotland. Other contributions came from the Robertson Trust, the Community Landfill Fund and the Caithness and North Sunderland Fund. The remaining sum of £95,000 had to be raised by the club through fundraising events.
[6] The clubhouse comprises four changing rooms which occupy about half of the building, a main hall area, a kitchen area that doubles as a bar area when functions are held and which can be shuttered off from the hall area, and toilets. There is also an officials' room, a store room and a boiler room. The main hall area, kitchen and toilets...
To continue reading
Request your trial
-
Revenue and Customs Commissioners v Caithness Rugby Football Club
...6(b) – HMRC's appeal refused. The Upper Tribunal (UT) dismissed HMRC's appeal against the decision of the First-tier Tribunal (FTT) ([2015] TC 04560) that zero-rating applied to supplies made in the course of constructing a SummaryThe Club was a registered charity and a members' club affili......
-
New Deer Community Association v Revenue and Customs Commissioners
...the new building fell within the scope of zero-rating. The UT followed the approach of the FtT in Caithness Rugby Football Club TAX[2015] TC 04560, which focused on local community use, rather than local community control (para. 17 of the The UT considered the nature of the activities condu......