TC03288: British Printing Industries Federation
| Jurisdiction | UK Non-devolved |
| Judgment Date | 04 February 2014 |
| Neutral Citation | [2014] UKFTT 150 (TC) |
| Date | 04 February 2014 |
| Court | First Tier Tribunal (Tax Chamber) |
[2014] UKFTT 150 (TC)
Judge Michael S Connell, Susan Stott
Mr Philip Simpson for the Appellant
Mr James Puzey, instructed by the General Counsel and Solicitor to HM Revenue and Customs, for the Respondents
VAT - Exempt services - VATA 1994, schedule 9 group 9Sch. 9, Grp. 9, item 1(d), note (5) and Article 132(1)(l) of the Principal VAT Directive (2006/112/EC) - Employers federation providing services to members in return for annual subscriptions - Whether membership subscriptions exempt from VAT - Whether "trade union" association - Whether primary purpose of federation included making representations to third party decision makers - Whether objectives of association were for the collective interests of members
The First-tier Tribunal considered an appeal by the taxpayer against a decision of HMRC that its membership subscriptions were not consideration for an exempt supply of services. The terms used to specify the exemptions were to be interpreted strictly and there was insufficient evidence to enable the tribunal to find that the principal objective of the taxpayer was that of an organisation whose main aim was to defend the collective interests of its members and represent them vis-à-vis third parties and in the public interest. The appeal was duly dismissed.
The taxpayer (BPIF) appealed against a decision of HMRC that its membership subscriptions do not qualify for exemption from VAT and against consequent decisions to refuse claims for repayment of VAT overdeclared. The claims were made on the basis that subscriptions charged to members should have been treated as exempt under Value Added Tax Act 1994, Sch. 9, Grp. 9, item 1(d). BPIF maintained that its primary purpose was to make representations to government on legislation and on other public matters affecting the business or professional interests of its members. However, BPIF later amended its grounds for appeal, adding that it was a trade union within the meaning of that expression as currently used in EC Directive 2006/112 ("the 2006 VAT Directive"), eu-directive 2006/112subsec-or-para 1 article 132art. 132(1)(l) and that this legislation and its predecessor had direct effect to the extent that it was not properly implemented into UK law. Accordingly, BPIF contended that the services provided to members in return for subscriptions should be treated as exempt. At the start of the hearing, the taxpayer withdrew its reliance on item 1 of Grp. 9. It was agreed that the issue for determination by the Tribunal was whether BPIF could rely on what is now art. 132(1)(l), formerly art. 13A(1)(l) of EC Directive 77/388, in so far as it referred to the supply of services to members in their common interest by a non-profit making organisation with aims of a trade union nature.
BPIF submitted that it is an organisation whose principal aims consist of defending the collective interests of its members. Applying the principles laid down by the ECJ in Institute of the Motor Industry v C & E CommrsECAS (Case C-149/97) [1999] BVC 21, the leading authority on the meaning of "trade union", BPIF contended that its activities fell within those which are regarded as being in the public interest in so far as it provided its members with a representative voice and strength in negotiations with appropriate third parties. It was, therefore, an organisation with aims of a "trade union nature".
HMRC submitted that BPIF's construction of the exemption, if accepted, was contrary to the comments of the ECJ in the IMI case concerning the need for the exemption to be construed strictly. They urged the Tribunal to determine the primary purpose of BPIF, if there was one, on the basis of an objective assessment of all the evidence rather than on its subjective views. The ECJ was clear in the IMI case that qualification for exemption would be based on the clearly defined activity coming within the terms of art. 132(1)(l), but BPIF had provided no clear delineation of its activities, nor a balanced and logical appraisal of their relative importance.
The Tribunal accepted that there was an abundance of evidence to show that BPIF was in discussions with government, public authorities and unions. However, this did not lead to the conclusion that its primary purpose was that of a trade union defending the collective interests of its members in the public interest. BPIF engaged in other activities, many of which were of a commercial nature and it was apparent that the range of services extended well beyond representational functions. Its core objects, as stated in numerous publications and in its declared financial strategy, all referred to its main objectives being to improve the profitability of members and to add value to their businesses. Whilst some of the activities and objects could be said to be in the general public interest they were of a quasi-commercial nature and not sufficient to entitle BPIF to exemption as a trade union. In the opinion of the Tribunal, the main aims or primary purpose of BPIF went beyond defending the collective interests of the federation's members and representing them in the public interest. Accordingly, BPIF had failed to establish that it satisfied the criteria for exemption from VAT. The appeal was dismissed.
The Tribunal's decision to dismiss BPIF's appeal will come as a major blow to the appellant as the total tax at stake exceeded £8m. The Tribunal was asked to consider the meaning of "trade union", a term not defined in VAT law, and it turned to the IMI case for guidance. In that case, the ECJ ruled that an organisation of a trade union nature is one whose main object is to defend the collective interests of its members and to represent them vis-à-vis the appropriate third parties, including the public authorities. In the judgment of the Tribunal, BPIF fell short of satisfying the primary purpose test. The federation engaged in extensive activities, many of which were of a commercial nature. For commentary on the meaning of "trade union", see the CCH VAT Reporter at 29-060.
[1]This an appeal by British Printing Industries Federation ("the Appellant" or "BPIF") against decisions by HMRC:
(a) dated 17 December 2008 and 8 September 2009, that the Appellant's membership subscriptions do not qualify for exemption from VAT and are taxable at the standard rate and the consequent decision to refuse payment of a voluntary disclosure submitted on 21 December 2007 in the net sum of £1,060,047 in respect of the period 1 September 2004 to 31 March 2007 ("the second period");
(b) dated 19 January 2010 and 19 March 2010, to refuse payment of a voluntary disclosure submitted on 27 March 2009 in the sum of £6,011,095, in respect of the period 1 January 1973 to 31 March 1996 ("the first period" or "the Fleming claim");
(c) dated 30 August 2011, to refuse payment of a voluntary disclosure submitted on 28 June 2011 in the sum of £1,298,281 in respect of the VAT period 1 April 2007 to 31 March 2009 ("the third period").
[2]The Appellant operates from 2 Villiers Court, Meriden Business Park, Copse Drive, Coventry, CV5 9RN and is registered for VAT under number 232 2271 07 with effect from 1 April 1973.
[3]By letter dated 21 December 2007 the Appellant's representative submitted two voluntary disclosures, one relating to over declared output VAT in the sum of £1,375,870 and one relating to over claimed input VAT in the sum of £315,823, constituting a net repayment of £1,060,047. The disclosures were made on the basis that the Appellant had accounted for output tax on subscriptions charged to members and reclaimed input tax incurred on related costs.
[4]The Appellant's view was that the subscriptions should have been treated as exempt under VAT legislation, with a proportion of VAT incurred on the costs of generating the income disallowed, which was calculated in accordance with their partial exemption special method. In accordance with VATA 1994 ("VATA") Value Added Tax Act 1994 schedule 9 group 9Item 1 of Group 9 of Schedule 9 its "primary purpose was to make representations to government on legislation and other public matters affecting the business or professional interest of its members".
[5]The Appellant said that it was the principal support organisation for the UK print, printed packaging and graphic communications industry. It provided benefits to members in return for membership subscriptions. It also provided a range of training and consultancy services to its clients in the printing industry.
[6]In broad outline the Respondents' grounds for refusing the Appellant's initial claim (the second period) were that the primary purpose of the Appellant was not to make representations to the UK government on behalf of its members. HMRC said that a review of the voluntary disclosures, and an analysis of the Appellant's turnover, the benefits of being a member, membership pricing and staff time, showed that the primary purpose of the Appellant was to provide a taxable service to members and non-members for a charge, either via a higher subscription fee, which related only to providing taxable services, or via additional charges.
[7]In a decision letter dated 17 December 2008 HMRC said that their enquiries had established that:
(a) the Appellant had 2,000 members and subscriptions were silver, gold or platinum, each respectively having an increased level of service, silver members only received telephone support compared to platinum members who received visits. Members received a range of goods and services including a discounted price on attendance at conferences, consultancy, legal and other services provided by the Appellant;
(b) 51% of income in 2006/7 was obtained from providing services and not subscriptions;
(c) the subscriptions themselves included many taxable services, and when the value of those services were calculated...
To continue reading
Request your trial