Eynsham Cricket Club v Revenue and Customs Commissioners
| Jurisdiction | UK Non-devolved |
| Judgment Date | 01 October 2019 |
| Neutral Citation | [2019] UKUT 286 (TCC) |
| Date | 01 October 2019 |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
[2019] UKUT 286 (TCC)
Upper Tribunal (Tax and Chancery Chamber)
Mr Justice Nugee, 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
Value added tax – Whether construction of cricket pavilion by cricket club zero-rated – Whether cricket club a charity for VAT purposes – Whether pavilion had intended use as a village hall or similarly in providing social or recreational facilities for a local community – Whether EU law principles of equal treatment or fiscal neutrality apply.
The Upper Tribunal determined that a cricket club which was registered as a Community Amateur Sports Club (CASC) was not a charity for VAT purposes. As a result, even though the other conditions to be a relevant charitable purpose building were met, the construction of a new clubhouse could not be zero rated.
Eynsham Cricket Club (ECC) is a village sports club which constructed a new clubhouse which, as well as being used by the Cricket Club, would be available for use by the local community in the manner of a village hall. ECC is not a registered charity but is a Community Amateur Sports Club (CASC).
ECC considered that the construction of the new clubhouse should be zero rated because it was a relevant charitable purpose building. VATA 1994, Sch. 8, Grp. 5, Note 6 defines relevant charitable purpose as “use by a charity in either or both of the following ways …” (emphasis added). The main substance of the appeal concerned whether or not ECC was a charity for VAT purposes.
The term “charity” is defined in FA 2010, Sch. 6, para. 1, and one of the conditions to be met is that the organisation be “established for charitable purposes only”. However, s. 6(1) of the Charities Act 2011 (CA 2011) states that a CASC cannot also be a registered charity.
The FTT held that ECC was not a charity because it was not established for charitable purposes only, but also concluded that a CASC can be a charity for VAT purposes, s. 6(1) CA 2011 notwithstanding.
The FTT's decision was complex and covered several different issues. Both HMRC and ECC appealed against aspects of it, but both agreed that the FTT had been incorrect regarding whether or not ECC was established for charitable purposes only.
The UT proceeded on the basis that ECC was established for charitable purposes only and that, therefore, it had to decide whether s. 6(1) CA 2011 meant that ECC was not a charity for VAT purposes because it was a CASC. The UT heard argument from both parties and considered the history of the Acts. It also considered the best approaches to statutory construction including references to Hansard to illuminate the intention of Parliament.
The UT concluded that the intent of the legislators was to “effect a sharp divide between CASCs and charities. A sports club could either be a CASC (and exempt from registration and regulation), or (if eligible) a charity (and access the more generous tax reliefs) but not both” (para. 112). At para. 122 the UT continued “We consider that this is the correct way to understand the legislation as a whole … In those circumstances we conclude that ECC, being registered as a CASC, does not qualify as a charity for VAT purposes”.
As a result of this conclusion ECC lost its argument and the construction of its new clubhouse was ruled to be standard rated.
As a consequence of its decision on the “charity point” there was no need for the UT to rule on other aspects of the case. However, the UT confirmed that, like the FTT, it accepted that the clubhouse was to be used as a village hall for the purposes of VATA 1994, Sch. 8, Grp. 5, Note 6(b). It further agreed with the FTT that concluding that the clubhouse was not a relevant charitable purpose building did not result in a breach of fiscal neutrality.
The UT's decision will be disappointing to ECC and also to other CASCs, many of whom were no doubt hoping that, as their aims are charitable, zero rating could apply to their buildings.
[1] Eynsham Cricket Club (“ECC” or the “Club”) appeals against a decision by the First-tier Tribunal (“FTT”) (Judge Jonathan Richards and Susan Lousada) released, following revisions on review, on 29 December 2017 (the “Decision”). The FTT dismissed ECC's appeal against a decision by the Respondents (“HMRC”) dated 21 May 2015 that ECC was not entitled to treat construction services supplied to them for the building of a cricket pavilion as zero-rated under the terms of Value Added Tax Act 1994 (“VATA 1994”) Schedule 8 Group 5 Item 2.
[2] The provision in VATA mentioned above 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.”
[3] ECC was, at all material times, a registered Community Amateur Sports Club (“CASC”) within the meaning of the Corporation Tax Act 2010 (“CTA 2010”)
[4] 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 CASC 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)? andIssue 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?
[5] The FTT determined Issues 1(b), 1(c) and 3 in favour of ECC. However, HMRC succeeded on Issues 1(a), 2 and 4. 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.
[6] 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).
[7] On 23 April 2018 Judge Herrington granted ECC permission to appeal on the papers to the Upper Tribunal in respect of Issue 1(a) and Issue 4.
[8] In its Response to ECC's application for permission to appeal, dated 19 June 2018, HMRC conceded that the sole basis on which the FTT had dismissed ECC's appeal, that is its decision in respect of Issue 1(a), was wrong in law. Following a case management hearing which was held on 22 January 2019 to consider the effect of HMRC's concession, the Upper Tribunal (Judge Herrington) issued a decision on 18 February 2019 ([[2019] BVC 506) in which the Upper Tribunal allowed ECC's appeal in respect of Issue 1(a) and determined that issue in ECC's favour as a preliminary issue before the Upper Tribunal.
[9] The effect of that decision was that ECC had effectively succeeded in its appeal before the FTT. However, as HMRC in its Response sought to challenge the FTT's findings in respect of Issue 1(b), Issue 1(c) and Issue 3 HMRC proceeded as the appellants. Therefore, although these proceedings are still formally an appeal by ECC against the Decision, ECC is now regarded, in substance, as the respondent.
[10] ECC has not appealed against the FTT's findings on Issue 2. ECC maintains its appeal on Issue 4 and that issue will be relevant if HMRC succeed on any of the FTT's findings which they challenge.
[11] The FTT made detailed findings of fact at [8] to [45], based on both the witness evidence of Mr Ian Miller, the Chairman of ECC, and the documentary materials before it. So far as relevant to this appeal, we summarise those findings as follows.
[12] ECC is a local village cricket club in Oxfordshire. ECC has been registered with HMRC as a CASC since 2003. On 20 February 2012, ECC's existing pavilion was destroyed by fire in a suspected arson attack. After an extensive fundraising effort, ECC...
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