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HMRC internal manual

VAT Construction

‘Relevant charitable purpose’ - interpretation of terms: use as a village hall or similarly


Guidance on what ‘use as a village hall or similarly’ means is contained in Notice 708 Buildings and construction at Section 14.7.3.

The relief is aimed at situations where the local community forms a charity, or uses an existing charity to organise the construction and operation of a building for itself to provide for its social or recreational activities. It is for the community to decide the range and mix of social or recreational activities it wants and how the building is designed and equipped to meet those needs.

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Characteristics of a village hall

Where a village is concerned, the local community traditionally organises itself by forming a village hall committee to fund the construction and management of a building to provide for a variety of social or recreational activities. The building is vested in village hall trustees who are usually drawn from representatives of local groups who use the hall.

Such buildings are often small and contain basic amenities, supporting a multi-use hall. It is hired out to the local community for a modest fee for use by a range of local clubs and groups, and also for wedding receptions, birthday parties, playgroups and other leisure interests. However, the size, and level of provision and facilities will be decided by the local community.

The inclusion of ‘similarly’ provides for communities other than villages that organise themselves in a way that is similar to those in a village in providing a venue for social or recreational activities. Thus, ‘similarly’ means similar to the way a village hall operates and not a building that provides for a range of activities associated with a village hall.

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Buildings used similarly to village halls

Examples of buildings that can be seen as being ‘used similarly…’, when the above characteristics are present, can be found at Section 14.7.3 of Notice 708, as well as examples of buildings that can’t.

In Sport in Desford (VTD 18914), a committee comprised of members of the local Parish Council and the local community was formed to raise funds for the construction of a clubhouse for use by the local community for a variety of sporting and recreational facilities. The Tribunal confirmed that sporting activities fall within the definition of social or recreational activities:

We find that the sporting activities fall within the definition of ‘social or recreational activities’. A high degree of sporting use does not make the use dissimilar to the use of a village hall.

However, a building designed for a particular sporting activity, for example, a swimming pool and ancillary facilities isn’t similar to a village hall. A building used similarly to a village hall must be capable of meeting the social and recreational needs of the local community and not simply confined to a special interest group.

In Jubilee Hall Recreation Centre Ltd ([1999] STC 381), the Court of Appeal considered the extent of ‘similarly’ in this context. Sir John Vinelott rejected the previous High Court approach, which held that ‘similarly’ meant similarity of function in providing social and recreational facilities, and is a building to which the local community engage in social and recreational pursuits. He held that:

In this context the plain purpose of sub-paragraph (b) was in my judgment to extend the relief in sub-paragraph (a) to the case where a local community is the final consumer…in the sense that the local community is the user of the services (through a body of trustees or a management committee acting on its behalf) and in which the only economic activity is one in which they participate directly.

We accept that use of the building can be by people from outside the local community. However, use by a local community can’t be extended to a building that is principally used by people that reside outside the locality. Sir John Vinelott in Jubilee Hall Recreation Centre Ltd agreed with the view expressed by the Tribunal in this point, saying:

Like the Tribunal I have ‘great difficulty with the notion that the daily influx on working days into an area of the people to staff its offices and shops and to attend its colleges, even if they have a greater attachment than its flocks of visiting tourists, are part of the local community’.

It may be claimed by schools and other educational establishments that by offering limited public access to sports halls and other recreational facilities that they qualify as similar to a village hall.

The Court of Appeal rejected this line of reasoning in St Dunstan’s Educational Foundation ([1999] STC 381), primarily on the following grounds:

  • the use by attendees of the school wasn’t as members of the local community, but in their role as pupils
  • the sports hall wasn’t used solely for a relevant charitable purpose as required under Item 2(a) and Note 6(b), but was intended, in part, also for educational use. Therefore, on a strict liability application the building fails the sole use test and this will inevitably apply to other educational establishments endeavouring to obtain zero rating for buildings under Note 6(b).