Loughborough Students Union; Keele University Students Union; Nottingham Trent Students Union; Students Union at Bournemouth University
| Jurisdiction | UK Non-devolved |
| Judgment Date | 27 June 2018 |
| Neutral Citation | [2018] UKFTT 357 (TC) |
| Date | 27 June 2018 |
| Court | First Tier Tribunal (Tax Chamber) |
[2018] UKFTT 0357 (TC)
Judge Peter Kempster
Mr Peter Mantle of counsel, instructed by VATangles Consultancy Ltd, appeared for the First, Second and Fourth appellants
Mr Noel Tyler (VATangles Consultancy Ltd) appeared for the Third appellant
Mr Joseph Millington of counsel, instructed by the General Counsel and Solicitor to HM Revenue & Customs, appeared for the respondents
Value added tax – Exemption – Fund-raising events – PVD 2006/112/EC, art. 132 – VATA 1994, Sch. 9, Grp. 12 – Social events organised by Students Unions – Appeal dismissed.
In a joined case the First-tier Tribunal (FTT) considered whether income arising from social events organised by four Student Unions (SUs) qualified for VAT exemption because they were fund-raising events organised by a charity.
The four SUs were all registered charities who worked to support students at the respective Universities. The SUs ran a range of social facilities including bars and catering outlets. They also organised various social activities and events.
The income which was the subject of this appeal arose from, variously, Graduation Balls, Summer Balls et al.
Grp. 12 of Sch. 9, VATA 1994 provides an exemption for supplies made from an event that is (a) organised by a charity, (b) whose primary purposes is raising money and that (c) is promoted as being primarily for the purpose of raising money, subject to certain conditions. The conditions relevant to the appeal are that (1) no more than 15 events of a similar nature should be organised at the same place in any one year and (2) the exemption should not give rise to distortion of competition. Grp. 12 enacts art. 132 of the Principle VAT Directive which, subject to various conditions, exempts income “in connection with fund-raising events”.
The SUs presented two arguments. First, that art. 132 had direct effect and that they were entitled to rely upon it without reference to the provisions of Grp. 12 (the FTT called this the EU Argument). Secondly, if this argument failed that the “15 events” condition attached to group 12 was “ineffective and not a necessary condition” (the FTT called this the Domestic Argument).
In its decision, the Tribunal addressed the domestic argument first and then the EU argument. However, before talking about either of these it first asked whether or not the events organised by the Unions were fund-raising events within the meaning of art. 132. The SUs had essentially argued that any activity they undertook to generate income was a fund-raising event. However, the Tribunal concluded that a fund-raising event was an event organised specifically to raise funds and that it was different from “business as normal”. Having examined the evidence before it the Tribunal concluded that, with the exception of the Summer Ball held by Bournemouth Students Union, all of the events were business as normal for the Unions.
The majority of the appeals were thus dismissed. However, in relation to the Bournemouth Summer Ball the Domestic Argument and EU Argument were considered.
The SUs argued that the 15 event limit should be interpreted as meaning that 15 events per year were exempt and that the 16th then became taxable. In contrast HMRC's view was that the exemption did not apply at all when the 15 event limit had been exceeded. The Tribunal agreed with HMRC on the basis that the alternative interpretation could give rise to distortion of competition.
Sch. 12 requires that for exemption to apply, an event must be promoted as being primarily for the purposes of raising money. Although the wording on publicity material for the Bournemouth Ball did satisfy the Tribunal, it was not convinced that the other events presented in evidence had been promoted as such. However, later in the decision, the Tribunal concludes that this requirement in UK Law is ultra vires the Principle VAT Directive.
Finally, note 11 of Sch. 12 excludes events from the exemption if they are likely to cause distortion of competition. Having received evidence on how Unions designed events and the types of events promoted by other suppliers in University towns the Tribunal concluded that all of the events were in competition with other commercial suppliers. Therefore, the exemption did not apply, even to the Bournemouth Ball which satisfied the other criteria.
The FTT thus determined that the events were not fund-raising events for the purposes of the exemption but that, even if it was wrong on this point, exemption still wouldn't apply because the conditions in Sch. 12 relating to number of events and distortion of competition had not been met.
Finally, the FTT addressed the EU Argument. The FTT confirmed that the SUs were entitled to exemption under art. 132 but it did not have direct effect because – with the exception of the publicity requirement discussed above – Sch. 12 was compliant with it. The FTT had already decided that the events which were subject of the appeal were not fund-raising events for the purposes of art. 132 and, even taking the publicity point into account, the “15 events” and “distortion of competition” conditions in Notes 4 and 12 to Sch. 12 had not been met.
The decision that the condition at 1(c) in Sch. 12 is ultra vires is unlikely to have significant impact. Most charities promote their events as fundraisers primarily in order to encourage people to purchase goods and services and make donations rather than to satisfy the VAT rules. The decision confirms that, like all exemptions, the exemption for charity fund raising events is to be interpreted narrowly as an exception from the normal rule that goods and services are taxable. Therefore, fundraising events must be different from “business as usual”.
This case is also a reminder that decisions made by one set of HMRC officers are not binding on other HMRC officers and that HMRC can change its policies. It is also a reminder that the FTT is not bound by previous FTT decisions.
The appellants in this case had taken account of the Tribunal decision in the Cheltenham & Gloucester Students Union case (which permitted exemption for some SU events) and one of them had, with HMRC's agreement, been treating events as exempt fundraisers from 1999 to 2012 when HMRC changed its mind. The FTT in this case specifically disagreed with the Cheltenham & Gloucester decision.
[1] The Appellants appeal against various decisions of HMRC rejecting claims for repayment of output VAT and making adjustments to VAT returns. The parties request a decision in principle to determine the correct VAT treatment of certain social events organised by the Appellants. The Appellants contend (and HMRC refute) that the events are exempt activities by virtue of being “fund-raising events”, and thus receipts from the events (including ticket sales and bar sales) are exempt supplies for VAT purposes.
[2] The following abbreviations for the parties are used in this decision notice:
- Loughborough – Loughborough Students Union
- Keele – Keele University Students Union
- NTU – Nottingham Trent Students Union
- Bournemouth – Students Union at Bournemouth University
- HMRC – the Respondents
[3] The events identified by the Appellants as eligible for exemption are as follows (descriptions are given in the witness evidence).
- Loughborough:Year ended 31 July 2007 – Rag Ball.Year ended 31 July 2008 – Rag Ball.Year ended 31 July 2009 – Fresher's Ball, Graduation Ball, eight FND events, and a Hey Ewe event.Year ended 31 July 2010 – Fresher's Ball, Graduation Ball, ten (corrected from eleven at the hearing) FND events, and two (corrected from one at the hearing) Hey Ewe events.Year ended 31 July 2011 – Fresher's Ball, Graduation Ball, six quizzes, two comedy evenings, three live music events, and two events with DJs who mix.Year ended 31 July 2012 – Fresher's Ball, and Graduation Ball.
- Keele:In 2006–07 – Graduation Ball, Summer Party, End of Exams Party, Finalists Party, Election Night Party, and three Flirt events.In 2007–08 – Graduation Ball, Summer Party, Varsity Party, Finalists Party, Freshers Party, a Reloaded Freshers DJ event, and five Flirt events.In 2008–09 – Graduation Ball, Monsters Ball, Summer Party, Christmas Party, Wicked Roller Disco, four Get Funked events, and two Flirt events.In 2009–10 – Graduation Ball, Woodstoke Ball, Halloween Ball, Finalists Party, Freshers Party, End of Exams Party, Christmas Party, Wicked Roller Disco, Headphone Disco, a Mega Monday event, a Rock-a-Oke event, a Get Funked event, and a Flirt event.
- NTU:These events in the period September to December 2010 – Kickstart, Baywatch Beach, Game On, You V Rave, Climax, Freshers Ball, two Trent Army events, and two Last Day of Term events.
- Bournemouth:The Freshers Balls, Graduation Balls and Summer Balls held between 1 February 2007 and 30 April 2012.
[4] Article 132 VAT Directive 2006 (Dir 2006/112/EC) provides, so far as relevant:
1. Member States shall exempt the following transactions:
- …
- (o) the supply of services and goods, by organisations whose activities are exempt pursuant to points (b), (g), (h), (i), (l), (m) and (n), in connection with fund-raising events organised exclusively for their own benefit, provided that exemption is not likely to cause distortion of competition;…
2. For the purposes of point (o) of paragraph 1, Member States may introduce any restrictions necessary, in particular as regards the number of events or the amount of receipts which give entitlement to exemption.
[5] Section 31 VAT Act 1994 provides, “A supply of goods or services is an exempt supply if it is of a description for the time being specified in Schedule 9 …”. Group 12 of Sch 9 VATA provides, so far as relevant:
To continue reading
Request your trial