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HMRC internal manual

VAT Trade Unions and Professional Bodies

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Trade unions and professional bodies: Background and law: Trade union nature in EU law

Organisations or their representatives occasionally argue for exemption in reliance upon “Article 132(1)(l) of Directive 2006/112” (formerly “Article 13.A.1(l)” of the “Sixth VAT Directive”, see VTUPB1100). They claim that the UK’s definition of a “trade union” is too narrow and that the article is intended to provide exemption for organisations that are similar to trade unions proper but which fail to meet the UK’s narrow definition of a trade union, for example because the members are employers rather than employees. The French text version of the article may be cited in support of their contention because it uses the term “syndicale”, which covers a much wider variety of organisations than trade unions as recognised in the UK.

You should reject this contention using the following reasoning:

  • We accept that “syndicale” has a broader interpretation than the term “trade union”.
  • “Trade unions’” functions are essentially to look after their members’ interests insofar as these are connected with their employments. They are therefore concerned with negotiating pay and other conditions of employment, representing their members’ interests in discussions with employers or the government, assisting members involved in legal disputes arising from their employment and similar matters.
  • We therefore accept that organisations that perform comparable functions but which are not “trade unions” proper are also entitled to exemption under the article.
  • We have implemented the article fully in respect of bodies of a “trade union nature” in “Group 9” because, although only “trade unions” proper are covered in “Item 1(a)”, “Items 1(b)” to “1(d)” provide for exemption for other organisations which we consider perform functions broadly comparable to those of “trade unions” and were therefore meant to receive exemption under the article.

British Tenpin Bowling Association

A tribunal considered the scope of “trade union nature” / “syndicale” and the intention of “Article 13.A.1(l)” in the case of “British Tenpin Bowling Association (LON/87/404)”.

The British Tenpin Bowling Association (BTBA) appealed against compulsory registration. BTBA was a non-profit-making organisation that had been established to promote and improve the sport of tenpin bowling. It received much of its income in the form of subscriptions from its members and Sports Council grants. Its first ground of appeal, that it was not caught by the “deemed business” provision in “section 47(2)(a)” of the “VAT Act 1983” (now section “94(2)(a)” of the “VAT Act 1994”) because it made no supplies to members, was rejected by the tribunal. However, BTBA argued in the alternative that its supplies were exempt because “Article 13.A.1(l)” required exemption that the UK had failed to provide for in either “Group 9” or “section 47(3)” of the 1983 Act (now “section 94(3)” of the “VAT Act 1994”).

… Mr Kelsey drew our attention to the English translation of the text of that article and submitted that the concept of ‘Trade Union’ was too narrow a translation of the French ‘syndicale’ which was wide enough to embrace the wider concept of Trade Associations such as Employers Associations and other Associations run on a non-profit-making basis.

The tribunal’s initial view was that it could not resolve the question without submitting the matter to the European Court for a preliminary opinion. However, the parties were given the opportunity to make further submissions before it made any such referral.

At the reconvened hearing, Customs and Excise gave evidence on the meaning of the text of the article in the French, German, Dutch, Danish, Italian, Spanish, Portuguese and Greek versions. We submitted that all the versions had to be considered and interpreted by reference to the purpose and general scheme of the “Sixth Directive”. The tribunal concluded that this was the correct approach and that, when this approach was applied, the aim of the Directive was clearly not to exempt every organisation that acted in the collective interest of its members.

This Tribunal considers that the correct approach is to examine all the versions of Article 13.A.1(l) and to interpret them by reference to the purpose and the general scheme of the Sixth Directive. Adopting this approach we conclude that to limit the relevant part of the exemption to ‘trade union’ ad (sic) defined by Section 28(1) of the Trade Union Labour Relations Act 1974 is too narrow in that it would appear to exclude other non profit making bodies acting in the collective interest of their members. We note however, that the provisions of item 1 of Group 9 of Schedule 6 to the Value Added Tax Act 1983 do in fact include other professional associations, although they are couched in terms too narrow to include the B.T.B.A.

This decision can be used in support of our view that we have fully implemented “Article 13.A.1(l)”, insofar as it relates to bodies of a “trade union nature”, in “Group 9” of “Schedule 9” to the “VAT Act 1994”. Two additional passages of the tribunal’s decision that you may find of assistance are included in the summary of the BTBA case on the computerised tribunal index.

Institute of the Motor Industry

In “The Institute of the Motor Industry (LON/96/224)”, the tribunal referred the question of the meaning of “trade union nature” to the European Court of Justice. The ECJ, in its judgement of 12 November 1998, ruled that an organisation of a trade union nature is “… an organisation whose main object is to defend the collective interests of its members - whether they are workers, employers, independent professionals or traders carrying on a particular economic activity - and to represent them vis-a-vis the appropriate third parties, including the public authorities.”