Shanklin Conservative and Unionist Club
| Jurisdiction | UK Non-devolved |
| Judgment Date | 25 February 2016 |
| Neutral Citation | [2016] UKFTT 135 (TC) |
| Date | 25 February 2016 |
| Court | First Tier Tribunal (Tax Chamber) |
Judge Barbara Mosedale
Mr I Spencer, of Ian Spencer & Associates Ltd, appeared for the Appellant
Ms I McArdle, Counsel, instructed by the General Counsel and Solicitor to HM Revenue and Customs, appeared for the Respondents
Value added tax – Whether appellant a body with aims of a political nature making a supply to its members in return for subscriptions – Whether appellant entitled on this basis to exempt whole or part of its membership subscription – No – Whether tribunal has jurisdiction to consider applicability of ESC 3.35 – Applying BT Pension Fund – No – Appeal dismissed – Comment on meaning of ESC 3.35.
The First-tier Tribunal (FTT) dismissed the appeal by Shanklin Conservative and Unionist Club that it was entitled to exemption under the Value Added Tax Act 1994 (“VATA 1994”), Sch. 9, Grp. 9, item 1 for any part of its membership subscriptions as being attributable to its political aims. The supply was a single supply comprising indivisible elements and benefits provided to members were mainly on the social side rather than political side. Whilst a part of the supply was referable to political aims, the supply was not mainly so, therefore, did not qualify for the exemption.
The appellant, Shanklin Conservative and Unionist Club, (the Club) had submitted a claim for repayment of output tax accounted for on membership subscriptions on the basis that its membership fees were exempt from VAT because it was a non-profit making body with objects in the public domain and of a political nature. The claim was subsequently twice reduced. The first reduction reflected that HMRC had agreed that a third of subscriptions could be treated as exempt being attributable to the provision of sports facilities (2 snooker tables and 3 darts boards) and output VAT had actually only been accounted for on two thirds of subscriptions. The second reduction was to reflect that only 30% of subscriptions were actually attributable to its political objectives. HMRC rejected the claim on the basis the appellant did not qualify for the exemption at all. The case was a lead case for four other cases.
The FTT first considered what the members actually got in return for their subscription, finding that this was something of a mixed bag. The members got the right to attend the premises which included a low-priced bar and free live entertainment, read magazines (which mainly contained club news but sometimes political articles), receive events programmes, take part in social and political activities (eg. bridge or distributing political leaflets) and the right to use the leisure and sports facilities; the latter being a real benefit in return for the subscription. The Club also organised other live entertainment events and political dinners. These were ticket events and whilst members had the right to buy tickets they were not member only events and were not a significant benefit of membership or return for the subscription.
The FTT then considered whether the Club was making a single supply comprising all those various benefits outlined above (often referred to as a “composite” supply), or whether it made a number of different supplies (often referred to as multiple supplies). In the former case, the entire supply, being a single supply, would have to meet the test for exemption; in the latter case, some of the supplies could be exempt while others standard rated. The FTT concluded that the membership subscription was in return for a single supply which comprised indivisible elements it would be artificial to split. It was not possible to be entitled to one benefit without being entitled to them all and it was also clear that the leisure and political activities provided by the Club were inextricably linked.
The question was then whether that single supply was mainly referable to the Club's political aims so as to qualify for exemption under Directive 2006/112, art. 132(1), enacted in the UK in VATA 1994, Sch. 9, Grp. 9, item 1. In this respect, the UK law required the services for which exemption is claimed to be referable only to its aims which meant that the service(s) provided in return for the subscription would need to be referable to the body's political aims and objectives.
The FTT found that the emphasis of the Club was on the social side rather than political side. Political benefits to the members were not the main aim of the Club during the period in question. Non-political benefits were extensive and political benefits of significantly less importance, tending to mostly occur only around election time. Whilst there was no doubt that the Club would not have come into existence were it not for its political aims, during the period in question its social benefits were at least as much the reason for its continued existence as its political aims. The membership subscription was not for services mainly referable to the Club's political aims; they were paid more for the social services provided which meant the supply was not within art. 132(1)(l) (or the UK equivalent of Sch 9, Group 9, item 1(e)).
The FTT then turned to ESC 3.35 which provided that a single supply could be divided up into its elements and the elements taxed as if they were separate supplies. HMRC had already agreed to a third of the supply being exempted as attributable to the provision of sports facilities. The FTT concluded that it had no jurisdication to consider this aspect of the claim as it could only apply the law and the concession was not part of the law. Nevertheless, the FTT's expressed a non-binding view that a proportion of the Club's subscription would be entitled to exemption under the ESC as there was no basis for HMRC to apply the concession to the sports facilities part of the supply but not to the political aims part of the supply.
The appeal was dismissed on the basis that the Club did not meet the legal criteria for exemption of the whole or any part of its supply in return for its membership subscriptions. The Club's options, if it wished to pursue the question of the ESC was to lodge an action for judicial review and/or lodge a complaint with the Adjudicator.
In this case, Shanklin Conservative and Unionist Club claimed exemption from VAT on a portion of its membership subscriptions as being attributable to its political aims. HMRC rejected the claim. The FTT ruled that the club was making a single supply comprising a package of benefits in exchange for its membership fees which it would be artificial to split and as the non-political benefits were extensive and political benefits of significantly less importance, it was not entitled to the exemption.
[1] The appellant (“the Club”) submitted a claim for repayment of (alleged) overpaid output tax on 31 March 2011. The basis of the claim was that its membership fees were properly exempt from VAT on the basis it was a non-profit making body with objects in the public domain and of a political nature.
[2] The claim covered the period 03/07 to 09/12 and was originally for £32,369 (representing output tax on the total of its membership fees in this period). The amount of the claim was revised on 13 April 2011 to reflect the fact that, since an agreement with HMRC in 2009 regarding its sports facilities and publications to which I refer below at paragraph 27, the appellant had only paid VAT on two thirds of its membership fees (from period 12/08) and it therefore needed to restrict its claim to reflect this. The amount claimed was reduced to £21,526. This amount was then further reduced by the appellant to £16,985 to reflect a reduction in the claim to being one for only 30% of the membership subscriptions.
[3] HMRC formally rejected the claim in principle on 26 April 2013 on the basis that the appellant did not qualify for the exemption. The appellant requested a review of this decision. The review decision letter is dated 14 October 2013. The appellant appealed against that decision.
[4] I mention in passing that this is a lead case with the appeals of four other conservative clubs stayed behind it.
[5] Evidence was given firstly by Mr Philip Smith OBE, who was Chief Executive of the Association of Conservative Clubs (“ACC”). His witness statement was not really challenged although he was asked to elaborate on it: I accept his evidence and summarise it below.
[6] The ACC was founded in 1894 with the aim of widening the public's political involvement and engagement with the Conservative Party. Individual conservative clubs can join the ACC and benefit from conferences, meetings and updates on club management and party political issues. The ACC provides standard rules which clubs can and do adopt. The appellant is a member.
[7] The ACC publishes a monthly conservative clubs magazine which is distributed to all conservative clubs. It includes news on clubs and also sometimes (but not invariably) political articles.
[8] Mr Smith was able to and did speak to conservative clubs in general: he had no particular knowledge of the appellant in this case. He explained that while there is always political activity within such clubs, it increases as election time approaches. The clubs are focal points for local leafleting campaigns and similar electioneering; the premises of the clubs themselves are used to display posters promoting the local candidate and simply by existing to promote the Conservative Party. Clubs often host offices and meetings for local Conservative Party events; and indeed often host the meetings at which a local candidate is selected and thereafter maintain close relationship with candidate if elected MP or councillor as the case may be. Conservative clubs often make donations to the Conservative Party and to local conservative associations. (It was explained that the Conservative Party is comprised of local conservative...
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