United Grand Lodge of England v R & C Commissioners
| Jurisdiction | UK Non-devolved |
| Judgment Date | 19 December 2023 |
| Neutral Citation | [2023] UKUT 307 (TCC) |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
Judge Phyllis Ramshaw, Judge Kevin Poole
Upper Tribunal (Tax and Chancery Chamber)
Value added tax – Exemptions, Item 1(e) of Group 9 of Schedule 9 VATA 1994 – Article 132(1)(l) Council Directive 2006/112/EC – Whether FTT failed to give reasons for rejecting part of Appellant's case – Yes – Whether aim to provide Relief to Freemasons and their dependents is philanthropic – No.
In United Grand Lodge of England v R & C Commrs [2024] BVC 502 the Upper Tribunal found that the appellant’s membership subscriptions were not exempt under Item 1(e) VATA 1994, Sch. 9, Grp. 9 because one of its main aims was the provision of Relief for Freemasons and their dependants and this was not a philanthropic aim.
The appellant appealed a decision of the FTT that subscriptions paid by members were taxable (). The appellant considered that they were exempt from VAT under Item 1(e) of VATA 1994, Sch. 9, Grp. 9 which exempts the membership subscriptions of ‘a body which has objects which are in the public domain and are of a political, religious, patriotic, philosophical, philanthropic or civic nature’.
This is the second time the VAT treatment of the subscriptions has been litigated. A previous attempt to obtain exemption also failed before the FTT and UT, see and. Since this first litigation the aims and activities of the appellant have changed, hence it being able to litigate the issue again.
The appellant appealed to the UT on two grounds. First, the FTT had failed to give proper reasons for dismissing the appeal and, second, the FTT had erred in law by applying a meaning of the word ‘philanthropic’ which was too narrow.
The FTT had found that when applying Item 1(e), if an organisation had more than one aim it was necessary to identity its main aim and, if that main aim fell within Item 1(e), the exemption applied. If the organisation had more than one main aim, exemption only applied if all of those main aims fell within Item 1(e) (see para. [3]). The appellant had been found to have three main aims being the promotion of the philosophy of Freemasonry, the giving of charitable support to good causes unconnected with Freemasonry and the giving of support to Freemasons and their dependants if they were in distress. These last two aims were collectively referred to as ‘Relief’.
The UT reviewed the FTT decision and accepted that it had not given adequate reasoning to support its conclusion that the provision of Relief by the appellant was i) a main aim and ii) did not fall within Item 1(e). The UT decided that the correct remedy for this error of law by the FTT was to remake the decision. The UT determined that the giving of Relief to Freemasons and their dependants was not a philanthropic aim and therefore, because the appellant’s main aims did not all fall within Item 1(e), it dismissed the appeal.
The FTT had found that the provision of Relief was a main aim of the appellant and not a subsidiary aim which flowed from its main aim of promoting the philosophy of Freemasonry. The appellant argued that this was an incorrect finding of fact but the UT reminded itself that the finding of facts was the role of the FTT and that its powers to disturb those findings of fact were limited. The UT did not consider that it was appropriate to make findings of fact regarding the aims of the appellant in this case.
The UT concluded that the appellant’s main aims did not fall within Item 1(e) because the provision of relief to distressed Freemasons and their dependants was not ‘philanthropic in the sense of benevolence to the world at large’. The appellant was ‘an organisation that raises funds from within the members that constitute that organisation with the aim of essentially re-distributing a large part of the funds (by way of benefits procured by them) back to some of those members and members’ dependents.’ (para. [97]).
This is the fourth time that the VAT liability of the appellant’s membership income has been considered by the courts. HMRC will be pleased that, once again, the courts have resisted applying a broad interpretation of Item 1(e).
Comment by Sarah Kay, Lead Technical Writer, Croner-i Ltd.
Owain Thomas KC, counsel, instructed by KPMG Law, KPMG LLP appeared for the appellant
Howard Watkinson, counsel, instructed by the General Counsel and Solicitor to His Majesty's Revenue and Customs appeared for the respondents
[1] This appeal concerns an exemption from Value Added Tax (“VAT”) that would otherwise be chargeable on supplies made by the Appellant to its members in return for subscription fees. The Appellant is referred to as “UGLE” by the FTT and was also referred to as such in two previous decisions. We refer throughout this decision to the parties as “the Appellant” and “HMRC” respectively.
[2] The Appellant appeals against a decision of the First Tier Tribunal (Tax Chamber) (“the FTT”) released on 1 September 2021 ([2021] TC 08250 (“the FTT decision”)). The FTT dismissed the Appellant's appeal against HMRC's decision to reject two claims for repayment of VAT that the Appellant had accounted for. The claims were made on the basis that the Appellant's supplies to its members in relation to subscription fees ought to have been treated as exempt from VAT under article132(1)(l) of Council Directive 2006/112/VAT (the “PVD”), applying to certain organisations with “aims of a … philosophical, philanthropic or civic nature”.
[3] The FTT held that if an organisation had more than one aim, its eligibility for the relief would depend on its main (or primary) aim, and if it had multiple main aims, it would only qualify for the relief if all its main aims fell within the list in article 132(1)(l) of the PVD. If it had a number of aims which were all equally important (i.e. if it had no main aim), then all those aims would have to fall within the list to enable the organisation to qualify for exemption. There is no appeal against this aspect of the FTT Decision.
[4] The FTT decided that the Appellant had a philosophical aim that was a central or main aim but that it also had another main aim of at least equal importance to the philosophical aim, namely the provision of “Relief” in two forms: donations to good causes unconnected with Freemasonry (which it regarded as philanthropic) and supporting Freemasons and their dependents in distress (which it regarded as “self-insurance” rather than philanthropic in nature). It considered that each of these two elements was, in its own right, a main aim, but the support of Freemasons and their dependents in distress was the more important of the two elements during the relevant period. It went on to say that:
It does not matter whether the provision of Relief is regarded as two aims, one philanthropic and one non-philanthropic, or, alternatively, a single aim which is a mixture of philanthropic and non-philanthropic activities. In either case, I find that UGLE had a main aim which was not “philanthropic” within art 132(1)(l).
[5] The FTT therefore concluded that the services supplied by the Appellant were not exempt from VAT.
[6] The FTT also decided that the Appellant does not have a civic aim – no appeal against that aspect of the FTT's decision has been made.
[7] The FTT rejected HMRC's submission that, in addition to falling within the list at article 132(1)(l) of the PVD, an organisation's aim (or main aim/s) must also be in the public interest before it would qualify for the exemption. There is no appeal against that conclusion.
[8] Permission to appeal was granted by the Upper Tribunal on two specific grounds. The grounds of appeal are set out below.
[9] All references to paragraph numbers in this decision are to paragraphs in the FTT decision unless otherwise indicated.
[10] The factual background is not in dispute. The Appellant is the governing body for the majority of Freemasons in England and Wales. There are other forms of Freemasonry whose practitioners do not belong to the Appellant.
[11] The FTT set out the following factual background:
[76] UGLE was founded in 1717 and is the oldest Grand Lodge of Freemasons in the world. It is the representative body of Freemasonry in England, Wales and the Channel Islands and its headquarters are at Freemasons' Hall, Great Queen Street, London. Freemasons' Hall is used for a number of meetings and also houses the two largest Masonic charities.
[77] UGLE is an unincorporated association. It has approximately 175,000 members who, in turn, are members of some 6,500 local Lodges. Some members belong to more than one Lodge. Mr Humberstone said (and I accept) that it is the largest secular fraternal and charitable organisation in the UK.
[78] The Lodges are grouped into Provinces. There are 48 Provinces which broadly correspond to the counties of England and Wales plus London. The Provinces report to UGLE as do five Lodges which report to UGLE directly rather than through a Province.
[79] UGLE has control over the Lodges and the practice of Freemasonry and the activities of Freemasons.
[80] UGLE has annual income of around £13m including £9m from Provinces/Lodges (membership dues, fees and room rentals) and some £3m investment income. It has net assets of £70m. It is managed by an executive team who are supervised by its Board, and it employs some 90 people. It operates as a not-for-profit organisation and does not distribute any monies to its members.
[12] In 2014 and 2018 the Appellant made two claims for repayment of VAT accounted for in VAT periods 06/10–03/18. The VAT had been charged on membership subscription fees. The total amount claimed was £2.83m. The basis of the claim for repayment was that, in the period April 2010 to March 2018, its supplies to its members were exempt under art 132(1)(l) of the PVD and Item 1(e) of Group 9 of Sch 9 to the VAT Act 1994 (“VATA”) because its main aims were...
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R & C Commissioners v Ridgway
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