Revenue and Customs Commissioners v Greenisland Football Club
| Jurisdiction | UK Non-devolved |
| Judgment Date | 18 December 2018 |
| Neutral Citation | [2018] UKUT 440 (TCC) |
| Date | 18 December 2018 |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
[2018] UKUT 0440 (TCC)
Upper Tribunal (Tax and Chancery Chamber)
Mr Justice Horner
Value added tax – Zero-rating under VATA 1994, Sch. 8, Grp. 5, item 2(b) – (1) Whether a clubhouse was a village hall or similarly for a relevant charitable purpose – (2) Whether, if certificate was incorrect, club had reasonable excuse – Clubhouse not a relevant charitable purpose building but club had a reasonable excuse for issue of certificate.
The Upper-tier Tribunal (UT) considered two issues. First, whether the FTT had been correct to conclude that the Club's club house was used for a relevant charitable purpose (and therefore its construction qualified for zero rating). Second, whether, if the club house was not a relevant charitable purpose building, the Club had a reasonable excuse for issuing a zero rated certificate.
The dispute between Greenisland Football Club (GFC) and HMRC was summarised by the FTT (Greenisland Football Club [2018] TC 06321) as follows:
In 2010 GFC began a project to build a new clubhouse which it was envisaged would be a multipurpose facility for use by the community. Before the work commenced GFC issued a certificate to the builder that the building was intended for use solely for a relevant charitable purpose and therefore the builder could zero-rate the supplies (para. 3)
After construction had been completed HMRC enquired into the VAT liability of the construction works and as a result of its enquiries decided that the construction should have been standard rated. Accordingly HMRC issued a penalty for £53,101 calculated at 20% of the cost of construction amounting to £265,505.00 (para. 4)
The FTT concluded that the clubhouse could be zero rated because it was a “village hall or similar” building and therefore a relevant charitable purpose building within Note 6(b) of Grp. 5, Sch. 8, VATA 1994. HMRC appealed against this decision on the grounds that (1) the FTT had failed to give adequate reasons for its decision and (2) the FTT had erred in concluding that GFC was not carrying out a business.
The UT agreed with HMRC on both grounds. It determined that the FTT had not provided sufficient information as to its reasoning and its reasoning was faulty in some respects, for example the UT states that the FTT had relied on the fact that GFC did not have any preference over other community groups when it came to booking facilities. However, a letter from GFC's accountants stated that it was given preference on Saturdays in the football season (para. 47 of the decision).
The UT addressed ground 2 of HMRC's appeal by considering whether the clubhouse was a relevant charitable purpose (RCP) building. The UT concluded that it was not a “village hall or similar” because it did not benefit the local community in the way that a village hall would. The UT gave several reasons for this conclusion, including that the management committee was wholly made up of GFC members, the hall was let to an after school club during term time and the GFC had preference when it came to making bookings.
An RCP building is also one used by a charity “otherwise than in the course or furtherance of business”. The UT concluded that the GFC was using the building for business purposes, it received subs from its members (which is a business activity as set out in s. 94(2) VATA 1994), leased it to the after school club and operated a shop/café.
Having concluded that the clubhouse was not a relevant charitable purpose building, and that therefore the club should not have issued a zero rating certificate to its builder, the UT finally considered whether the FTT had been correct to conclude that GFC did have a reasonable excuse for issuing the certificate.
GFC's development officer had provided evidence to the FTT that he consulted HMRC's Notices and obtained professional advice on the issue from his accountant. HMRC complained that the professional advice could not be evidenced (the GCF did not produce a formal advice letter or email confirming the accountant's advice) and that the GFC should have approached HMRC for clearance.
The UT noted that the FTT had found the development officer to be a credible witness. The UT had no grounds to interfere with its conclusion that the GFC did have a reasonable excuse. GFC had concluded HMRC's Notices and the UT noted that HMRC's public notice does not advise tax payers to seek advice direct from HMRC.
As the UT found that the GFC did have a reasonable excuse, its appeal against the penalty issued by HMRC succeeded.
This case underlines the importance of retaining written confirmation of advice obtained from professional advisors. GFC could not produce unambiguous evidence of the advice it received and was fortunate that the FTT found its development officer to be so credible. If GFC had been able to provide HMRC with evidence of its accountant's advice it is entirely possible that the case would not have proceeded to Tribunal, and the expense of two hearings would have been saved.
The case also illustrates the care with which questions as to the VAT liability of construction services should be approached.
[1] This is an appeal on a point of law from the decision of the First Tier Tribunal (“FTT”) dated 7 February 2018 whereby it concluded that the appeal of Greenisland Football Club (“GFC”) against a penalty issued by the Commissioners of Her Majesty's Revenue and Customs (“HMRC”) under section 62(1) of the Value Added Tax Act 1994 (“the Act”) for £53,101 arising out of construction works in respect of which GFC had issued a zero rated certificate pursuant to item 2 Group 5 of Schedule 8 of the Act, should succeed. Further, that even if GFC had been wrong to issue a zero rated certificate GFC had a reasonable excuse for issuing it under section 62(3) of the Act.
[2] Ms Natasha Barnes appeared for HMRC instructed by Ms Alice Britton of HMRC's Solicitor's Office. Mr Tim Brown was instructed by Constable VAT Consultancy LLP. Both legal teams in general and counsel in particular deserve high praise for the quality of their submissions both written and oral and the efficient and effective way they presented their respective cases before the First Tier Tribunal.
[3] This appeal relates to the liability of GFC to pay VAT on the cost of the construction of a new clubhouse at Greenisland. The project was commenced in 2010 by GFC who hoped to construct a multipurpose facility for use by its members and the local community. GFC was formed in 1995 in Greenisland. Part of the area GFC serves falls into the top 26% of the most deprived wards in Northern Ireland. GFC leased the land it occupies from Carrickfergus Council originally, but its landlord is now Mid and East Antrim Council.
[4] The lease contains a covenant on behalf of GFC:
Not to use the premises or any part thereof other than for community recreational, social, physical and cultural purposes (including Club Meetings, briefings and as a point of social contact for Club Members and for servicing needs of the Local Community) and as permitted by the Council and subject to the Council's satisfaction.
[5] The Club was established to promote “fitness, advanced education and facilitate social development, particularly in relation to 10–18 year olds (hereinafter called “the beneficiaries”) through healthy participation in sports and Association football …”; see paragraph 3 of the Constitution of GFC (also known as Greenisland Boys Football Club) which sets out the objects of the Club. At the time of the hearing before the FTT in January 2018 there were only some 40 members who each paid a subscription of £20. The explanation for this is that membership can only be achieved for those 18 years or over. Membership gives those members access to this new clubhouse which contains a small gym and various other facilities. The decision before the FTT records that “as well as full members, organisations within the area of benefit may be admitted as Affiliated Members and well-wishers anywhere or persons with special knowledge or experience to offer may become Associate Members.”
[6] The evidence was that boys who play for GFC pay £20 per month by way of dues. Not every boy pays £20 per month. Those dues are discounted, for example, if there are a number of juvenile members from the same family. I was given no further details as to the financial arrangements between GFC and those juveniles who benefit from the facilities and who play for GFC's teams. However, the accounts of 2016 which were before FTT demonstrate that substantial dues were collected from the boys who played for GFC's teams. The total sum including membership subscriptions was over £55,000.
[7] The FTT was told by the GFC's Development Officer, Mr Munn that the clubhouse as constructed contains an office/committee room, an IT suite doubling as a meeting room, a kitchen, a fitness suite (“the gym”), function room (“the main hall”), showers, a storeroom, toilets and a community garden. Its design does not cater specifically for Association football. The showers are available for those who use the gym. The building is open at least 70 hours per week every week throughout the year. When it is open, anyone, regardless of whether they are a member or not, can call in and buy tea or coffee which is made in the kitchen. This is staffed by volunteers called “the Pink Ladies”.
[8] The Management Committee of GFC comprises only members of GFC which is open to anyone who is over 18 years of age as I have noted. I have also set out the process by which Affiliated Membership and Associate Membership is acquired. The FTT was told that in respect of membership of the Management Committee anyone could be nominated by a member of GFC and the nominee did not have to be a member of GFC although once elected to the Management Committee at an AGM, the nominee...
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