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HMRC internal manual

VAT Trade Unions and Professional Bodies

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Trade unions and professional bodies: Item 1(a) trade unions etc

Definition of “trade union”

Exemption for supplies made by trade unions to their members is provided for in “Item 1(a)” of “Group 9” of “Schedule 9” to the “VAT Act 1994”. “Note (2)” to “Item 1” states that the term ““trade union”” is to have the meaning given “to it by section 1 of the Trade Union and Labour Relations (Consolidation) Act 1992”:

  1. In this Act a “trade union” means an organisation (whether temporary or permanent) -

(a) which consists wholly or mainly of workers of one or more descriptions and whose principal purposes include the regulation of relations between workers of that description or those descriptions and employers or employers’ associations; or

(b) which consists wholly or mainly of -

(i) constituent or affiliated organisations which fulfil the conditions in paragraph (a) (or themselves consist wholly or mainly of constituent or affiliated organisations which fulfil those conditions), or
  
(ii) representatives of such constituent or affiliated organisations, and whose principal purposes include the regulation of relations between workers and employers or between workers and employers’ associations, or the regulation of relations between its constituent or affiliated organisations.

The key elements of the above definition are twofold:

  • the members of the organisation (“workers”) will be employees;
  • the “principal purposes” of the organisation must “include the regulation of relations between workers and employers”.

“Other organisations”

“Item 1(a)” is not confined to trade unions as defined under “Definition of “trade union”” above. Exemption can also be granted to any “other organisation of persons having as its main object the negotiation on behalf of its members of the terms and conditions of their employment”. To satisfy this criterion, the members of the organisation must actually be engaged in employment. A tribunal considered the types of organisation that would fall within “Item 1(a)” in the case of the “Civil Service Pensioners Alliance (LON/94/36A)”.

The Civil Service Pensioners Alliance (CSPA) is an independent non-party political action group founded by a group of civil service pensioners who were concerned that civil service pensions were not inflation-linked. The CSPA had three objects:

  • maintaining / improving the purchasing power of civil service pensions,
  • taking part in activities that would benefit any pensioner in receipt of a civil service pension paid from UK funds, and
  • promoting the social wellbeing of members.

The 65,000 members of the CSPA included:

  • pensioners,
  • persons within 3 years of retirement and due to become qualifying pensioners, and
  • the spouses of the foregoing types of member.

Among the grounds upon which the CSPA claimed exemption for its membership supplies was a claim to meet the exemption criteria of “Item 1(a)”.

The tribunal found that these criteria were not met because:

  • the members of the CSPA were not mainly “workers” but pensioners;
  • its “principal purposes” did not “include the regulation of relations between workers and employers”. It did not negotiate terms and conditions of employment: negotiations on pension rights were conducted by a Joint Committee on Superannuation that was composed of representatives from recognised civil service trade unions.