Eynsham Cricket Club v Revenue and Customs Commissioners
| Jurisdiction | UK Non-devolved |
| Judgment Date | 18 February 2019 |
| Neutral Citation | [2019] UKUT 0047 (TCC) |
| Date | 18 February 2019 |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
[2019] UKUT 0047 (TCC)
Upper Tribunal (Tax and Chancery Chamber)
Judge Timothy Herrington
John Brinsmead-Stockham, Counsel, instructed by Hogan Lovells International LLP, Solicitors, appeared for the appellant
Howard Watkinson, Counsel, instructed by the General Counsel and Solicitor to HM Revenue and Customs, appeared for the respondents
Procedure – Whether parties should be permitted to pursue new arguments on appeal in respect of an issue where HMRC conceded FTT's conclusions gave rise to an error of law – No – Neither party permitted to pursue new arguments – Effect of that conclusion on the determination of the relevant ground of appeal in the Upper Tribunal.
In a case where both parties agreed that the FTT had erred in law the Upper-tier Tribunal (UT) considered whether they could present new arguments on the issue when the case was appealed to the UT.
Eynsham Cricket Club (ECC) is a community cricket club which constructed a new pavilion. ECC believed that the new pavilion should be zero rated on the grounds that it was a relevant charitable purpose building. However, HMRC disagreed.
In order to qualify as a relevant charitable purpose building, a building must be used “by a charity”. The conclusion of the FTT was that ECC was not a charity for the purposes of this relief. ECC is not registered with the charities commission and the FTT considered whether it was a charity for the purposes of the VAT relief. The conclusion the FTT reached was that as ECC was a community amateur sports club if it has been “established for charitable purposes only” it would qualify as a charity. However, the FTT determined that ECC has not been established for charitable purposes only (para. 10) because the pavilion would be used to provide social facilities for the local community as well as for the purposes of sport.
The consequence of the FTT's conclusion was that ECC's appeal was dismissed. As a result it appealed to the UT.
Both HMRC and ECC agreed that the FTT's reasoning was incorrect in law (although HMRC clearly accepted the conclusion of the FTT, i.e that it was not a charity for VAT purposes). In relation to the question whether ECC had been “established for charitable purposes only” both parties wanted to present new argument on this issue.
As the UT states (para. 40) “it is well-established in the courts that normally a party will not be allowed to raise a new point on appeal”. The UT heard argument from both sides but was not convinced that there was the possibility of an injustice occurring and, therefore, permission was denied. The UT further considered that remitting the case to the FTT to be re-litigated would be “disproportionate” given the amount of money involved and the fact that the ECC is a small voluntary organisation being represented on a pro bono basis (para. 72).
The UT concluded that it could allow ECC's appeal on this issue. The conclusion of this procedural hearing is therefore that when the case proceeds to the UT on appeal it will be accepted that ECC is “established for charitable purposes only”.
Although this hearing was one of procedure it is part of a case which will be of interest to the many charitable organisations which are not registered with the charities commission. The Club will be pleased that it has won its argument that it is established for charitable purposes only. The technical arguments advanced by both sides were complex and concerned isolated issues rather than the underlying dispute as a whole. We await the conclusion of the UT on the status of Eynsham Cricket Club with interest.
[1] This is a case management decision relating to a tax appeal to the Upper Tribunal concerning the question as to whether either or both parties should be permitted to argue a point on appeal which it is accepted was not taken by either party before the FTT.
[2] The position is complicated by the fact that HMRC, the Respondents to this appeal, concedes that the basis on which the First-tier Tribunal (“FTT”) decided the issue in question was wrong in law and that is common ground. HMRC therefore accept that the decision of the FTT on the issue in question cannot stand on the basis of the reasoning adopted by the FTT. It was also common ground between the parties that the FTT decided the point in question on a basis which was entirely unprompted and of its own volition.
[3] However, in their Response to the Appellant's Grounds of Appeal to the Upper Tribunal, HMRC sought to introduce a new argument on the basis of which they contend that the FTT's conclusion on the issue can stand and accordingly the Appellant's appeal on the issue can be dismissed.
[4] Eynsham Cricket Club, the Appellant in this appeal (“ECC”), contends that it is not open to HMRC to run the new argument. It contends that the FTT's conclusion on the point, which both parties now accept was wrong, was the sole basis on which the FTT decided the issue in question against ECC. Therefore, since the FTT found in favour of ECC on all other points relevant to the issue, there is no material part of the FTT's decision on the issue left to uphold in favour of HMRC and therefore the Upper Tribunal should now take the necessary procedural steps to determine the issue in the substantive appeal before the Upper Tribunal in favour of ECC.
[5] It is necessary to set out in some detail the issues in this appeal that were before the FTT and how they were argued and subsequently determined.
[6] The subject matter of the appeal before the FTT was whether the construction of a cricket pavilion by ECC, a cricket club constituted as an unincorporated association, was zero rated for VAT purposes. ECC contended that the services supplied to it in connection with the construction were zero rated by virtue of Schedule 8, Group 5, item 2 of the Value Added Tax Act 1994 (“VATA”). That provision provides for zero rating to apply to the supply in the course of the construction of a building intended for use only for a “relevant charitable purpose.” In order to obtain the benefit of that provision, the requirements of the definition of “relevant charitable purpose” contained in Note 6 to Group 5 of Schedule 8 VATA had to be met, which meant that it had to be found that the pavilion was intended to be used “by a charity” either “otherwise than in the course or furtherance of a business” or “as a village hall or similarly in providing social or recreational facilities for a local community.”
[7] HMRC decided that the conditions for zero rating were not met and that the services provided to the Appellant in connection with the construction of the pavilion were standard rated for VAT purposes.
[8] ECC appealed to the FTT. There were four issues before the FTT as follows:
Issue 1: At the relevant time, was ECC a “charity” for the purposes of VATA Schedule 8, Group 5, Note 6, which applies the definition contained in the Finance Act 2010 (“FA 2010”) Schedule 6?
This issue was broken down into the following three sub-issues:
- Issue 1(a): was ECC established for charitable purposes only within the terms of FA 2010 Schedule 6 paragraph 1(1)(a)?
- Issue 1(b): did s 6 of the Charities Act 2011 (CA 2011), which provides that a community amateur sports club established for charitable purposes cannot be a charity under the general law of charities, prevent ECC from being established for charitable purposes only under FA 2010 Schedule 6 paragraph 1(1)(a)? and
- Issue 1(c): did ECC satisfy the registration condition in FA 2010 Schedule 6 paragraph 3, that is did it comply with any requirement to be registered under CA 2011?
Issue 2: Was the new pavilion intended for use solely by ECC “otherwise than in the course or furtherance of a business” for the purposes of VATA Schedule 8, Group 5, Note 6(a)?
Issue 3: Was the new pavilion intended for use solely by ECC as “a village hall or similarly in providing social or recreational facilities for a local community” for the purposes of VATA 1994 Schedule 8, Group 5, Note 6(b)?
Issue 4: If ECC was not entitled to treat the services supplied to it in connection with the construction of the new pavilion as zero-rated for UK VAT purposes, then would this constitute a breach of the EU law principles of: (1) equal treatment; and/or (2) fiscal neutrality?
[9] The FTT (Judge Richards and Ms Susan Lousada) in a decision originally released on 3 August 2017 but subsequently revised on review and released on 29 December 2017, dismissed ECC's appeal against HMRC's decision.
[10] The FTT determined Issues 1(b), 1(c), and 3 in favour of ECC. However, HMRC succeeded on Issues 1(a), 2 and 4. I shall return to this point in more detail later, but I mention now that the basis of the FTT's finding that ECC was not “established for charitable purposes only” was that although it was established for a charitable purpose, namely “the advancement of amateur sport” within the terms of s 3(1)(g) CA 2011 it was also established for a subsidiary purpose of providing social facilities to the residents of Eynsham. The FTT found that such a subsidiary purpose was not a charitable purpose within s 3 CA 2011 and consequently ECC was not “established for charitable purposes only” for the purposes of Schedule 6 FA 2010.
[11] ECC's success before the FTT in respect of Issues 1(b), 1(c), and 3 meant that if ECC had also succeeded in respect of Issue 1(a) then ECC's appeal would have been allowed, in full, on the basis of the VAT analysis as a matter of UK law (i.e. without ECC having to rely on the EU law arguments in Issue 4).
[12] ECC applied to the FTT for both a review of, and permission to appeal against, the FTT's original decision. ECC sought permission in respect of Issue 1 (a) and Issue 4. ECC observed that the “subsidiary purpose” point had not been relied on by either party and the FTT had not heard any submissions on it...
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