Taylor (t/a Mill House Retreats)
| Jurisdiction | UK Non-devolved |
| Judgment Date | 05 November 2021 |
| Neutral Citation | [2021] UKFTT 405 (TC) |
| Court | First-tier Tribunal (Tax Chamber) |
[2021] UKFTT 405 (TC)
Judge Aleksander, Norah Clarke
The appellant appeared in person
Jessica Parlour, litigator of HM Revenue and Customs' Solicitor's Office, appeared for the respondents
Value added tax – Exemption – Spiritual welfare – Provision of spiritual welfare services as part of a retreat – Conditions for exemption – Whether state-regulated – Whether Church of England Measures are public general Acts – No – Application of fiscal neutrality – VATA 1994, Sch. 9, Grp. 7, Item 9 – Appeal dismissed.
The First-tier Tribunal (FTT) concluded that regulation by the Church of England was regulation by the state but was not “state-regulated” as defined by the VAT legislation and therefore the provision of spiritual welfare services by the appellant was not exempt from VAT.
Taylor was an active priest in the Church of England and director of the retreat centre, Mill House Retreats.
It was not disputed the provision of spiritual welfare by Mill House Retreats was of the kind described in VATA 1994, Sch. 9, Grp. 7, Note 6. It would therefore be exempt from VAT if supplied by a charity, a state-regulated private welfare institution or agency, or a public body.
Rev Taylor acknowledged Mill House Retreats was neither a charity nor a public body. She submitted it was state-regulated, and entitled to exemption, given that it was regulated by the Church of England which, as an established church, forms part of the state.
The FTT agreed Mill House Retreats was regulated by the state however, the requirement in VATA 1994, Sch. 9, Grp. 7, Note 8 was that the entity should be “state-regulated” which was a defined term and required the regulation to be by a government minister, rather than a minister of the church pursuant to a provision of a public general Act. Church Of England legislation were not public general Acts. Mill House Retreats and Rev Taylor were not “state-regulated” and therefore not entitled to exemption.
On an alternative argument on the application of the PVD (Directive 2006/112/EC) and fiscal neutrality, the FTT referred to the recent Court of Appeal decision in Leisure, Independence, Friendship and Enablement Services Ltd; The Learning Centre (Romford) Ltd v R & C Commrs [2020] BVC 4 and held the PVD had been properly implemented into UK law and VATA 1994, Sch. 9, Grp. 7, item 9 did not contravene fiscal neutrality. Appeal dismissed.
All exemptions must be strictly interpreted and, unfortunately, this appellant fell just short of the threshold for exemption.
[1] The Reverend Jane Taylor appeals against a review decision of HMRC contained in a letter dated 6 May 2020. She submits that Mill House Retreats provides spiritual welfare services which are exempt from VAT by virtue of Item 9, Group 7, Schedule 9, VAT Act 1994.
[2] At the hearing of the appeal, HMRC were represented by Jessica Parlour. The Appellant represented herself. Rev Taylor was accompanied by her colleague Rev Lynne Chitty.
[3] We heard evidence and submissions from Rev Taylor. HMRC prepared an electronic bundle of documentary evidence of 118 pages, and an authorities bundle (split into two files, of 61 and 46 pages respectively). In addition, both parties submitted skeleton arguments.
[4] The background facts are not in dispute, and we find them to be as follows.
[5] Rev Taylor is an active priest in the Church of England, ministering in the Exeter diocese. She conducts services in the Exeter diocese, but her primary work is as director of the retreat centre, Mill House Retreats.
[6] Rev Taylor is a “self-supporting minister”, which means that she is not in receipt of a stipend from the Church of England. She was previously a paid parish priest. Although she is self-supporting, she remains subject to the same quality of training and supervision as a paid member of the Church of England clergy.
[7] Through the Church of England, Rev Taylor has received training in spiritual direction and her Mill House Retreat activities are supervised by the Church of England. She is licensed as a priest by the Exeter diocese and has current permission to officiate anywhere in the Exeter diocese. Her name appears on the National Register of Clergy maintained by the Church of England.
[8] Rev Chitty is an ordained deacon of the Church of England and assists Rev Taylor at Mill House Retreats. She too is licensed and supervised by the Church of England as regards the provision of spiritual welfare.
[9] Mill House Retreats provides spiritual welfare through the provision of Christian retreats. As well as ministering to individuals, it also hosts retreats for Church of England organisations – Rev Taylor gave as an example a retreat for bishops in South West England.
[10] Rev Taylor's evidence was that she operates Mill House Retreats on a non-profit making basis. By this she means that she does not extract any surplus from operating the retreats. However, if Mill House Retreats were to prepare GAAP compliant accounts, it is unclear whether they would show a profit from the perspective of UK accounting standards.
[11] The Principal VAT Directive (Directive EU 2006-12) (“the PVD”) provides an exemption for the provision of services associated with the provision of welfare. Article 132(1) provides that
Member States shall exempt the following transactions:
[…]
(g) the supply of services and of goods closely linked to welfare and social security work, including those supplied by old people's homes, by bodies governed by public law or by other bodies recognised by the Member State concerned as being devoted to social wellbeing;
[…]
[12] Article 133 provides that:
Member States may make the granting to bodies other than those governed by public law of each exemption provided for in points […] (g), […] of article 132(1) subject in each individual case to one or more of the following conditions:
- the bodies in question must not systematically aim to make a profit, and any surpluses nevertheless arising must not be distributed, but must be assigned to the continuance or improvement of the services supplied;
- those bodies must be managed and administered on an essentially voluntary basis by persons who have no direct or indirect interest, either...
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