Eynsham Cricket Club v Revenue and Customs Commissioners
| Jurisdiction | England & Wales |
| Judgment Date | 23 February 2021 |
| Neutral Citation | [2021] EWCA Civ 225 |
| Year | 2021 |
| Court | Court of Appeal (Civil Division) |
[2021] EWCA Civ 225
Lord Justice Henderson, Lord Justice Singh and Lady Justice Simler
Court of Appeal (Civil Division)
Value added tax – Zero rating – Supplies of construction services – New cricket pavilion – Whether for relevant charitable purpose – Whether a CASC was a charity – VATA 1994, Sch. 8, Grp. 5, Note 6 – No – Whether the EU principles of equal treatment and /or fiscal neutrality apply – No – Appeal dismissed.
The EWCA (Civ) dismissed an appeal by the taxpayer and agreed with the previous decision of the UT that the Club could not be a charity or, therefore, obtain the benefit of zero rating on the supply of relevant construction services.
The Court of Appeal (EWCA) upheld the decision of the UT in Eynsham Cricket Club v R & C Commrs [2019] BVC 518 that a cricket club which was registered as a Community Amateur Sports Club (CASC) was not a charity for VAT purposes, and could not qualify for zero rating on the construction of a new cricket pavilion.
The Club was a local village, amateur cricket, club run by volunteers and registered with HMRC as a CASC (community amateur sports club). The Club's pavilion was destroyed by fire. Following an extensive fund-raising effort a new pavilion was constructed. The contractor initially zero rated their supplies of construction services but, following discussions, HMRC decided the Club was not entitled to benefit from zero rating of the construction services.
The Club appealed that decision. Whether the Club was entitled to have the construction services supplied on a zero-rated basis depended on whether it was a “charity” for the purposes of VATA 1994, Sch. 8. In particular, whether it was “established for charitable purposes only” under FA 2010, Sch. 6. The FTT had found that it was possible for the Club to be both a CASC and a charity but, because it had a subsidiary purpose of providing social facilities to the residents of Eynsham, the Club was not established for charitable purposes alone and not entitled to zero rating.
The UT upheld the conclusion that the Club was not a charity but on the different basis that the deeming provision in s. 6 of the Charities Act (CA 2011, s. 6) applied in this case and the Club, as a CASC, could not be a charity within the meaning of FA 2010, Sch. 6.
Section 6 states that a registered sports club (CASC) established for charitable purposes was to be treated as not being so established, and accordingly could not be a charity.
Both the FTT and UT rejected the Club's submissions that the principles of equal treatment and fiscal neutrality applied.
There were two issues to be determined by the EWCA;
- whether CA 2011, s. 6 prevented a CASC from being treated as established for charitable purposes and therefore from being a charity entitled to the zero rating of construction services and;
- whether the denial of zero rating was a breach of the EU principles of equal treatment and/or fiscal neutrality.
Examining the historical development of the definition of a charity for VAT purposes, it was noted this had been a matter of general law until 1 April 2008 when the Charities Act 2006 came into force and provided a statutory definition that would have applied for VAT purposes.
The concept of a CASC was introduced by the Finance Act 2002 creating a statutory entity to give CASCs some, but not all, of the tax benefits available to charities. Before 1 April 2009 when Charities Act 2006, s. 5(4) and (5) came into force, it would have been possible for a club such as ECC to be treated as a charity for VAT purposes, even although it might also be registered as a CASC. From this date that was no longer the case.
CA2006, s. 5(4) absolved CASCs from the additional, potentially burdensome, administrative requirements of registering as a charity for charity law purposes. A CASC that was charitable could therefore cease to be registered as a CASC, register as a charity, be subject to the administrative requirements and get the full tax benefits of being a charity. Or it could decide to remain a CASC and obtain the more limited benefits available. But a CASC established for charitable purposes was to be treated as not being established for charitable purposes and could not be a charity.
CA 2011 came into force on 14 March 2012. Section 6 contained substantially identical provisions to CA 2006, s. 5(4) and 5(5).
FA 2010, Sch. 6 provided a separate definition of “charity” for tax law purposes, including VAT, in relation to supplies of goods or services made on or after 1 April 2012. The Club contended, having failed to cross refer the new legislation to section 6 of CA 2011, Parliament had not continued the prohibition on CASCs being charities and section 6 was thereafter confined to operating as a deeming provision within CA 2011.
HMRC argued that s. 6 is clear and unambiguous and was a deeming provision for all purposes, and fully applicable to the definition of a charity in FA 2010, Sch. 6, para 1(1)(a).
The EWCA confirmed the task of the court was to ascertain and give effect to the true meaning of what Parliament had said, having regard to the purpose of a particular provision, and to best give effect to that purpose, without producing an absurd result. In this case, two Acts had to be interpreted together in a coherent way.
FA 2010, Sch. 6 dealt with charities (in Pt. 1) and CASCs (in Pt. 3) separately, which reflected the fact these were separate and distinct entities eligible for different tax reliefs. It introduced a new definition of “charity” for tax purposes and para. 1(1) provided that for a body to qualify as a charity for tax purposes it must be,
- established for charitable purposes only,
- meet the jurisdiction condition,
- meet the registration condition, and
- meet the management condition.
It permitted a charity established under the laws of other EU member states to be treated as a charity and qualify for UK tax reliefs. It also introduced a new management condition. It did not, otherwise, depart significantly from the previous definition in CA 2011. In fact, the first condition had the meaning given in CA 2011, s. 2.
CA 2011, s. 6 was a deeming provision but there was nothing in the words of this section to limit the scope of its effect. The language is general and there is no ambiguity. It stood on its own as a provision for all purposes unless disapplied. Nothing in FA 2010, Sch. 6 limited or disapplied its effect. A CASC was, for all purposes, to be treated as not being established for charitable purpose and therefore could not satisfy the charitable purpose condition in FA 2010, Sch. 6, para. 1.
The EWCA concluded the statutory definition of a charity that applied for VAT purposes meant that it was possible, from 6 April 2002, for a local amateur sports club to be both a CASC and a registered charity until 1 April 2009 when CA 2006, s. 5(4) came into force (now CA 2011, s. 6). From then on, a club registered as a CASC was treated as not being established for a charitable purpose and so could no longer be a charity for any purpose of the law of England and Wales, including for VAT. A sharp divide was introduced between the two and existing CASCs had to decide whether to register as charities or remain as CASCs. There was nothing in the clear and unambiguous language of FA 2010, Sch. 6 (or in the Explanatory Notes and Memorandum) to indicate that Parliament intended, on its introduction, a fundamental change in this earlier approach adopted to CASCs. The absence of any reference to such a policy change suggests there was no policy change and therefore a CASC was for all purposes to be treated as not established for charitable purposes and could not be a charity or obtain the benefit of zero rating of the relevant construction services. It also followed from the fact a CASC cannot be a charity that it is not subject to the control of the HIgh Court in the exercise of its jurisdiction in relation to charities. A CASC therefore cannot satisfy the jurisdiction condition.
On the question of the principles of equal treatment and/or fiscal neutrality, the Club argued the only thing stopping them from being a charity, and obtaining the same treatment as a charity, was a deeming provision. This constituted a breach of those principles on the basis that this classification can have no significance for EU VAT law and yet it results in otherwise identical supplies being subject to different rates of VAT.
This was rejected by the EWCA. Instead it concluded the FA 2010 and CA 2011, taken together, reflected a domestic social policy choice to treat a CASC and a charity as separate and different entities, governed by different regulatory regimes. The legislation permitted VAT relief to charities who have chosen to submit to the regulatory regime governing charities with the greater burden that imposes. A club that registered as a CASC to obtain different tax reliefs and lesser regulatory burdens cannot qualify as a charity. The two regimes are different and the difference in treatment is objectively justified.
Appeal dismissed.
A disappointing result for the taxpayer and the many other local and community-based sports clubs this decision will affect.
Mr John Brinsmead-Stockham (instructed by Hogan Lovells International LLP) appeared for the appellant
Mr Howard Watkinson (instructed by General Counsel and Solicitor to HMRC) appeared for the respondent
[1] This appeal concerns the question whether supplies of construction services in the course of building a new cricket pavilion to a “community amateur sports club” (referred to below as a “CASC”) such as Eynsham Cricket Club (“the Club”), qualify for zero-rating for the purposes of value added tax (“VAT”) pursuant to Item 2, Group 5, Schedule 8 to the Value Added Tax Act 1994 (“the VAT Act”). The amount at stake on this appeal is modest though important to the Club, but the point of...
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