YMCA Birmingham and Others
| Jurisdiction | UK Non-devolved |
| Judgment Date | 21 June 2018 |
| Neutral Citation | [2018] UKFTT 458 (TC) |
| Date | 21 June 2018 |
| Court | First-tier Tribunal (Tax Chamber) |
[2018] UKFTT 0458 (TC)
Judge Peter Kempster
Mr David West (Booker Associates) appeared for the appellants
Ms Natasha Barnes of counsel, instructed by the General Counsel and Solicitor to HM Revenue & Customs, appeared for the respondents
Value added tax – Exemption – (1) Welfare services – Directive 2006/112 (the Principal VAT Directive), art. 132(1)(g) – VATA 1994, Sch. 9, Grp. 7, item 9 – Supporting people programme – Housing-related support – Identity of recipient of supplies – Whether distressed persons – Whether instruction – Whether designed to promote physical or mental welfare – (2) Interaction with welfare advice and information in VATA 1994, Sch. 7A, Grp. 9 – YMCA's appeals dismissed.
The First-tier Tribunal (FTT) dismissed the appeals against HMRC's decision that exemption applied to the provision of “housing related support”.
The YMCA (The Young Men's Christian Association) is a worldwide organisation, which operates through 114 bodies, each registered as a charity and each separately registered for VAT. The YMCAs appealed against decisions by HMRC that the provision of “housing related support” constituted the supply of welfare services that were exempt for VAT.
In 2003, the Department for Communities and Local Government launched the Supporting People Programme (SPP). Under the SPP, funding streams were brought into a single ringfenced grant to local authorities to provide housing related support (HRS) services to help vulnerable people live independently in the community. The SPP grant conditions set down a framework, in which the administering local authorities determined how the money was spent. In 2009, the ring-fence around the SPP funding stream was removed. The programme became wholly decentralised, with each administering authority exercising discretion over where to direct their funding to meet local needs. Since 2011, the allocation of funds for SPP has been subsumed within the area-based grant made to each local authority.
HRS aimed to address the problem of individuals being unable to maintain tenancies and so suffering repeated homelessness. It aimed to stop distress and encourage better personal organisation. Once an individual had been located, they were visited by the keyworker at intervals, to assess how they were managing the tenancy. The agreed support plan was a rolling programme of flagging problems, helping the individual to solve those problems themselves, and providing a timeframe for progress. The support plan was different from a care plan that would be drawn up by a social services department. Individuals were not accepted on the plan if they lacked the capacity to acquire the skills offered by HRS.
The FTT made various findings of fact on what services were provided by the YMCA under the local authority contracts. Suitable individuals were allocated by the local authority to the YMCA. The YMCA evaluated the individual to ensure that he met the criteria for accommodation in a YMCA-supported housing project. Persons with drug problems or disruptive behaviour, or persons who need permanent supervision, were not suitable. A key expectation was that the individual should be able to develop within two years the skills necessary to live independently and so not return to homelessness. With the YMCA, the period of accommodation was usually shorter than that, probably around six months. A support worker (keyworker) was assigned to each individual. The keyworker and the individual together drew up a list of problems, with a timescale, designed to equip the individual with the lifeskills necessary for future independent living. Example tasks might be to register for housing benefit and job seekers allowance, register with a doctor, inform relevant persons of a change of address, shop for groceries and wash own clothes. This was different from the care plans used by social workers. The keyworker met periodically with the individual to review progress, offer encouragement, and update the plan. The keyworker did not perform the tasks for the individual, but advised how to achieve them and assisted if appropriate. The keyworker was not expected to deal with serious or specialised problems (e.g. health issues, addictions, financial difficulties, learning disabilities), but guided the individual to appropriate expert assistance within, or known to, the YMCA. The YMCA charged rent to residents, usually mandated straight from the resident's housing benefit entitlement. The YMCA received fees from the local authority. The contracts had performance criteria, measured by reference to the number of individuals who successfully moved on to independent living. HRS was one of several support offerings available to residents in YMCA-supported housing projects. The YMCA also offered services such as family mediation and employability courses.
The appeals raised three questions:
- Who was the recipient of the supply of services?
- Were the services supplied welfare services within Sch. 9, Grp. 7, item 9 – and thus exempt supplies?
- Were the services supplied welfare advice or information within Sch. 7A, Grp. 9 – and thus reduced-rated supplies?
The YMCA argued that the HRS services did not fall within item 9, because:
- the recipients of the supply were the young people, who paid no consideration; and
- although the local authority paid, it is not a distressed person within Note (6) and thus did not receive welfare services.
Thus, the YMCA contended that establishing the identity of the recipient of the services was important. However, the FTT noted that nothing in either art. 132(1)(g) or item 9 of and Note (6) to Grp. 7 states that the identity of the recipient of the welfare supplies is relevant in deciding whether the services qualified for exemption. Thus, the identity of the recipient did not determine whether exemption applied (para. 59 of the decision).
Although the individuals receive the benefit of the HRS services, the YMCA was instructed by, and paid by, the local authority. The local authority did that by outsourcing its statutory obligation to provide HRS. So, there was a supply of services by the YMCA to the local authority regardless of the fact that the main beneficiaries of the HRS were the young residents (para. 61 of the decision).
HMRC argued that the HRS services were exempt under item 9, because they comprised within Note (6) to Grp. 7“services which are directly connected with the provision of … instruction designed to promote the physical or mental welfare of … distressed … persons”.
The FTT used the following definition of instruction from the Oxford English Dictionary (OED): “That which is taught; knowledge or authoritative guidance imparted by one person to another.” The FTT held, in favour of HMRC, that the HRS services met that definition.
The FTT noted that the local authorities determined that certain young people required supported housing and HRS. The HRS services might in a different context appear to be divorced from physical or mental welfare, e.g. instructing someone how to hoover or to claim housing benefit. However, in the context of a distressed and vulnerable young person anxious to avoid repeat homelessness, the FTT held that the HRS services were designed to promote physical or mental welfare of the young recipient. Thus, the HRS services constituted exempt welfare services within item 9 of Grp. 7 (para. 76 and 77 of the decision).
Reduced-rating was not claimed and so did not fall to be determined by the FTT. The only aspect which the FTT examined was HMRC's interpretation of “welfare services” in the item 9 of Grp. 7, which made ineffective the reduced-rating for “welfare advice or information” in Sch. 7A, Grp. 9. The FTT disagreed, as there is a distinction between the two provisions. The reduced-rating provisions specifically exclude “supplies of advice or information provided solely for the benefit of a particular individual or according to his personal circumstances” (Note 3(c)). There could be “advice or information” that is “provided solely for the benefit of a particular individual or according to his personal circumstances”, but which do not amount to “instruction” in item 9, and so does not constitute “welfare services” within item 9.
Thus, the FTT dismissed the appeals and exemption applied to the services.
The law on exemption is construed narrowly. In deciding the nature of the services supplied, the FTT considered the economic and commercial realities of the transactions as well as the written contracts. The local authorities may reclaim VAT charged on services supplied “not for the purpose of any business carried on by the body”. Thus, any VAT charged by the YMCA on its fees was recoverable by the local authority. HMRC did not contest that analysis, but successfully argued that YMCA should not have charged VAT because exemption applied.
[1] In this decision notice the parties are referred to by the following abbreviations:
- YMCA Birmingham – Birmingham
- YMCA Black Country Club – Black Country
- YMCA Leicester – Leicester
- YMCA Burton upon Trent and District – Burton
- The Respondents – HMRC
[2] The Appellants appeal against formal decisions by HMRC, respectively: Birmingham decision dated 19 June 2015, upheld on internal review on 14 October 2015; Black Country decision dated 19 June 2015, upheld on internal review on 15 October 2015; Leicester decision dated 27 September 2016; and Burton decision dated 27 March 2017. In summary, each of the disputed decisions stated that the provision of “housing related support” did not constitute the supply of welfare services that were exempt for...
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