Revenue and Customs Commissioners v European Tour Operators' Association

JurisdictionUK Non-devolved
Judgment Date23 October 2012
Neutral Citation[2012] UKUT 377 (TCC)
Date23 October 2012
CourtUpper Tribunal (Tax and Chancery Chamber)

[2012] UKUT 377 (TCC).

Upper Tribunal (Tax and Chancery Chamber).

Henderson J.

Revenue and Customs Commissioners
and
European Tour Operators' Association

James Puzey (instructed by the Solicitor to HM Revenue and Customs) for the appellants.

Timothy Brown (instructed by Charcroft Baker, Chartered Accountants) for the respondent.

The following cases were referred to in the decision:

Bookmakers' Protection Association (Southern Area) LtdVAT (1979) 1 BVC 1,121; (1979) VATTR 215

British Association for Shooting and Conservation Ltd v R & C CommrsUNKVAT [2009] EWHC 399 (Ch); [2009] BVC 323

British Association of Leisure Parks, Piers & Attractions LtdTAX [2011] UKFTT 662 (TC); [2011] TC 01504

Expert Witness Institute v C & E CommrsUNKVATWLR [2001] EWCA Civ 1882; [2002] BVC 220; [2002] 1 WLR 1674

Haderer v Finanzamt WilmersdorfECASVAT (Case C-445/05) [2010] BVC 306; [2007] ECR I-4841

Value added tax - Exemption - Aims of a political nature - Making representations to government - Whether membership subscriptions of trade association constituted exempt supplies - Primary purpose of association - Case remitted to FTT to reconsider and amplify reasoning and conclusions about primary purpose of association - Value Added Tax Act 1994, Value Added Tax Act 1994 schedule 9 subsec-or-para 9Sch. 9, Grp. 9, item 1(d), Note (5) - Council Directive 77/388, eu-directive 77/388 subsec-or-para ! article 13art. 13(A)(1)(l).

This was an appeal by HM Revenue and Customs against a decision of the First-tier Tribunal ([2011] UKFTT 88 (TC); [2011] TC 00965) that membership subscription income of the taxpayer association was exempt from VAT by virtue of the Value Added Tax Act 1994, Sch. 9, Grp. 9, item 1(d) on the basis that it was a non-profit making organisation the primary purpose of which was to make representations to the government on legislation and other public matters which affected the business or professional interests of its members.

The taxpayer was a trade association for tour operators and suppliers to tour operators. It was a non-profit making organisation. It represented the trade by lobbying the UK and European Parliaments in respect of legislation affecting tour operators. It had members who were tour operators and associate members who were not tour operators. Historically it had accounted for VAT on its membership subscription income. In June 2008, on professional advice, it submitted a voluntary disclosure for overpaid output tax, on the basis that members' subscriptions were exempt from VAT under VATA 1994, Sch. 9, Grp. 9, item 1(d), implementing art. 13(A)(1)(l) of Council Directive 77/388 (the sixth directive).

HMRC issued a decision letter determining that the taxpayer's membership subscriptions were subject to VAT at the standard rate. That was because its primary purpose appeared to be networking among buyers and sellers in the travel industry. On appeal, the FTT considered the scope of the exemption under VATA 1994, Sch. 9, Grp. 9, item 1(d) on the basis that "making representations to the government" included making representations to the UK Government and to EU institutions in relation to UK matters (contrary to the published guidance issued by HMRC in Notice 701/05 that it meant representations only to the UK Government). The FTT directed itself that the taxpayer's primary purpose was what its directors and members considered to be the most important matter it was seeking to achieve or doing in return for membership subscriptions. It held that the primary purpose was establishing relations with EU institutions and that the test in item 1(d) was accordingly satisfied ([2011] UKFTT 88 (TC); [2011] TC 00965). HMRC appealed.

HMRC argued that there was an inconsistency between the findings that the association's principal purpose was to establish relations with the European institutions and the finding that most of the members of the association were associate members who joined not because of the lobbying activities of the association but instead for the networking and marketing opportunities it provided to the associate members. HMRC further submitted that Note (5) to Grp. 9 provided that item 1(d) did not apply unless the taxpayer restricted its membership wholly or mainly to individuals or corporate bodies whose business or professional interests were directly connected with the purposes of the association, and that the finding by the FTT that associate members joined for the networking and marketing opportunities negated any direct link between the business interests of associate members and the assumed primary purpose of the association.

Held, remitting the matter to the FTT for it to reconsider and amplify its findings about the primary purpose of the association:

1.The Upper Tribunal shared the reservations expressed by the FTT about the meaning of "making representations to the government" in item 1(d). There was no reason why the wording should not be interpreted in the light of the broadly phrased reference to "aims of a political … nature" in the governing EU legislation so as to include, at least, representations to EU institutions in relation to matters that would have effect in other member states as well as the UK, and representations to the national governments of other member states. However, it was unnecessary to resolve that issue, and the Upper Tribunal proceeded on the basis adopted by the FTT.

2.It was wrong to regard the "primary purpose" test as a subjective one, and the FTT had erred in law when it directed itself that the primary purpose of the taxpayer was what its directors and members considered to be the most important matter it was seeking to achieve or doing in return for membership subscriptions. The relevant enquiry was an objective one, to be answered primarily by an examination of the stated objects and the actual activities of the body in question. The subjective views of the members or officers might throw some light on that enquiry, but they could not be elevated into a diagnostic test. The aims of an organisation were to be found in its constitutional documents, tested against the reality of what it did. It was permissible to approach the activities of an organisation on the basis that it had a main or primary aim which characterised its fiscal treatment. An organisation would not have aims of a civic nature if its objectives were solely, or perhaps mainly, for the benefit of its members. An organisation might have multiple objects no single one of which could be said to be predominant. There was no legal necessity for an organisation to have a single predominant purpose. (British Association for Shooting and Conservation Ltd v R & C Commrs [2009] BVC 323 applied.)

3.Since the relevant test was essentially objective in nature, there was no necessary inconsistency between the finding of primary purpose and the finding that the subjective reason why most associate members joined was to take advantage of the networking and marketing opportunities afforded by membership.

4.Since the FTT was the sole tribunal of fact, the Upper Tribunal could not be sure that it would have reached the same conclusion had it not misdirected itself in law about the nature of the test to be applied, and had it clearly taken into account the possibility that the taxpayer might have multiple objects, no single one of which could be said to be predominant. This was a case that depended on a careful evaluation of all the evidence, both written and oral, in the light of a correct appreciation of the relevant legal test. It was clearly not a case where it could be said that only one conclusion was reasonably open to the FTT, on the basis of its primary findings of fact, if it had correctly directed itself in law. It followed that the case had to be remitted to the FTT for it to reconsider and amplify its reasoning and conclusions about the primary purpose of the taxpayer.

5.Whereas item 1(d) referred to the primary purpose of the organisation, and it was that primary purpose which prima facie qualified it for exemption, Note (5) merely referred to "the purposes of the association", without expressly limiting those purposes to the primary purpose referred to in item 1(d). Weight had to be given to the clear difference in wording between item 1(d) and Note (5), and there was no good reason to restrict the generality of the reference to the purposes of the association in the latter context. To read "the purposes" in that way would not deprive the note of any meaning. The requirement of a direct connection with those purposes would still have to be satisfied, so a mere indirect financial or other connection would not be enough. On a fair interpretation of Note (5), a direct connection with all the purposes of the association taken together would satisfy the requirement; and that was precisely what the FTT found the position to be. Whether a direct connection with just one of the ancillary purposes, viewed in isolation, would also suffice was less clear. But the FTT expressly looked at the purposes of the association as a whole, and there was no error of law in its approach.

6.It appeared that a substantial protection for HMRC might be available in art. 13(A)(2)(b) of the sixth directive (art. 134(a) of Directive 2006/112), which provided that the supply of services or goods should not be granted exemption under, inter alia, para. (1)(l) if it was not "essential to the transactions exempted". It was arguable that, in the context of art. 13(A)(1)(l), the "transactions exempted" were to be regarded as those goods or services which were supplied pursuant to the aims which qualified for exemption (in the present case, aims of a political nature), and that only supplies which were essential to the attainment of those aims were to be granted exemption. On such an approach, ancillary fund-raising activities, although of obvious assistance to the attainment of the...

To continue reading

Request your trial
6 cases
  • British Association of Leisure Parks, Piers and Attractions Limited v The Commissioners for HM Revenue and Customs
    • United Kingdom
    • Upper Tribunal (Tax and Chancery Chamber)
    • 12 March 2013
    ...Customs Commissioners [2009] EWHC 399 (Ch) (Lewison J) and Revenue and Customs Commissioners v European Tour Operators Association [2012] UKUT 377 (TCC) (Henderson J). I can summarise the principles which I derive from those authorities, and other principles which were not in so far as they......
  • TC03288: British Printing Industries Federation
    • United Kingdom
    • First-tier Tribunal (Tax Chamber)
    • 4 February 2014
    ...an organisation must be tested against what happens in reality. (Paragraph 41) and R & C Commrs v European Tour Operators' AssociationVAT[2012] BVC 1922 where Henderson, J. said that the relevant enquiry is an objective one to be answered primarily by an examination of the stated objects an......
  • Loughborough Students Union & Others v The Commissioners For Her Majesty's Revenue & Customs, TC 06571
    • United Kingdom
    • First-tier Tribunal (Tax Chamber)
    • 27 June 2018
    ...Services Ltd Court of Appeal [2008] STC 2209 EB Central Services HMRC v European Tour Operators’ Association v HMRC Upper Tribunal [2013] STC 1060 ETOA Loughborough Students Union v HMRC Upper Tribunal [2014] STC 357 Loughborough 2013 UT Loughborough Students Union v HMRC First-tier Tribuna......
  • British Association of Leisure Parks, Piers and Attractions Ltd v Revenue and Customs Commissioners
    • United Kingdom
    • Upper Tribunal (Tax and Chancery Chamber)
    • 12 March 2013
    ...for Shooting and Conservation Ltd v R & C CommrsVAT[2009] BVC 323 (Lewison J) and R & C Commrs v European Tour Operators' AssociationVAT[2012] BVC 1922 (Henderson J). I can summarise the principles which I derive from those authorities, and other principles which were not in dispute, so far......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT