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HMRC internal manual

VAT Trade Unions and Professional Bodies

Trade unions and professional bodies: Item 1(b) professional associations: Meaning of "profession" and "professional"

The meaning of “profession” and “professional” has been considered by numerous tribunals, and there is therefore a substantial body of opinion as to the definition of those terms.

These deliberations are relevant to “Item 1(c)” as well as “1(b): professional” in “Item 1(c)” has exactly the same meaning as in “Item 1(b)”. You can find out more about “Item 1(c)” in VTUPB5300.

Often an association will claim that its subscriptions are exempt under “Item 1(b)” or, alternatively, the “fostering professional expertise” head of “Item 1(c)”. Such a dual argument was raised in all of the cases referred to in VTUPB4100, and also in the cases of

  • “Institute of Employment Consultants Ltd (LON/86/410)”,
  • “Institute of Leisure and Amenity Management (HC CO/71/87)” and
  • “Institute of Chartered Shipbrokers (LON/96/1743)”.


Despite the gloss subsequently applied to it, the basic test for what constitutes a profession remains that laid down by Du Parcq L J in the case of “Carr v. Inland Revenue Commissioners (1944) 2 All ER 163”:

Ultimately one has to answer this question: Would the ordinary man, the ordinary reasonable man - the man, if you like to refer to an old friend, on the Clapham omnibus - say now, in the time in which we live, of any particular occupation, that it is properly described as a profession? I do not believe one can escape from that very practical way of putting the question; in other words, I think it would be in a proper case a question for a jury, and I think in a case like this it is eminently one for the Commissioners. Times have changed. There are professions today which nobody would have considered to be professions in times past. Our forefathers restricted the professions to a very small number; the work of the surgeon used to be carried on by the barber, whom nobody would have considered a professional man. The profession of the chartered accountant has grown up in comparatively recent times, and other trades, or vocations, I care not what word you use in relation to them, may in future years acquire the status of professions. It must be the intention of the legislature, when it refers to a profession, to indicate what the ordinary intelligent subject, taking down the volume of the statutes and reading the section, will think that “profession” means. I do not think that the lawyer as such can help him very much.

Several important points emerge from this test.

  • The test is highly subjective - there is no legalistic criterion that defines a profession. The test is essentially that an occupation will be regarded as a profession when the man in the street would recognise it as such. Therefore when tribunals consider the matter, the factors that they take into account in reaching their conclusions will only be indicators that point towards whether or not an occupation is a profession, and not fixed criteria constituting a definitive test.
  • Professions and professional associations will be determined upon a case-by-case basis. The subjective nature of the “Carr” test means that the particular circumstances attaching to each occupation or association will be highly relevant in determining the final outcome. Very different conclusions can therefore be reached in the cases of occupations or associations that are superficially near-identical.
  • The categories of profession are not closed: Du Parcq makes it clear that one is looking at the present time when considering whether or not an occupation is a profession. He specifically contemplates that some occupations not currently regarded as professions may acquire that status in the future.

Discussed below are the names of several tribunal decisions in which “Item 1(b)” was considered, and the indicia identified by the tribunals in reaching their conclusions.

Allied Dancing Association

In “Allied Dancing Association Ltd (MAN/91/84”), the association was a non-profit-making body composed primarily of teachers of dance. The majority taught recreational rather than theatrical dance. Customs and Excise had argued that “Item 1(b)” did not apply because the teaching of recreational activities was not part of the profession of teaching.

The tribunal found that exemption under “Item 1(b)” applied because ballroom dancing was more than simple recreation and the teaching of it could therefore be regarded as “more akin to the teaching of arts than to the teaching of sports or pastimes”.

The “Carr” test was adopted and the tribunal commented upon some of the elements that would be considered when applying it.

… “I will not attempt to define the process by which the ordinary reasonable man identifies an occupation as a profession. Many elements will doubtless be involved, among them the status of the occupation and of those who engage in it, the need for a qualification in order to engage in it, and the acceptance of standards of behaviour by those who engage in it… in relation to teaching, in my judgement the holding of a recognised qualification is one of the matters which are material in distinguishing a person who merely teaches from a member of the teaching profession.”

… “the mere fact that a business was conducted in what might be described as a professional manner did not make the business a profession. Nevertheless in my judgement the existence of the Appellant’s code, such as it is, is one of the matters which the ordinary reasonable man would take into account in concluding that the Appellant falls within item 1(b), and the fact that the code is rudimentary when compared with the codes which apply to the Bar or to the medical profession, for example, does not disqualify it from consideration.”

The indicators in this case were:

  • the status of the occupation and those engaged in it;
  • whether or not persons within the occupation required a qualification;
  • whether the persons within the occupation were bound by a code of conduct.

The payroll and superannuation administrators

In “Association of Payroll and Superannuation Administrators (MAN/90/1015)”, the association had been formed to provide recognition and job-related assistance and information to people working for local authorities and similar bodies in connection with payroll and pension administration. The tribunal found that the Association was not within “Item 1(b)” because the knowledge of the Association’s members was confined to a limited sphere and particular job that was not compatible with the occupation being a profession.

… “in many of the acknowledged professions there are workers who have detailed knowledge in a narrow sphere who provide services but would not be considered members of that profession. Membership of a profession requires, in its early stages, a broad general education covering the spectrum of the profession, later specialisation may dull the memories but that broad base of knowledge remains. In the case of the Association there is no base of a broad band of knowledge. The knowledge is to a high standard over a very limited subject.”

The indicator identified in this case was that of a distinctive and broad base of knowledge from which a person may subsequently diversify into more specialised areas.

Association of Reflexologists

Reflexology is a form of therapy for treating ailments and stress by massaging the soles of the feet on the principle that specific areas of the feet relate to specific parts of the body. The tribunal in “Association of Reflexologists (LON/94/403A)” found that the association was not a professional association within “Item 1(b)”. It applied the “Carr” test in the light of the indicia of a profession that had been used in a 1970 Report by the Monopolies Commission on the Supply of Professional services. These were as follows.

  • Practitioners apply a specialist skill enabling them to offer a specialist service.
  • The skill has been acquired by intellectual and practical training in a well-defined area of study.
  • The service calls for a high degree of detachment and integrity on the part of the practitioner in exercising personal judgement on behalf of a client.
  • The service involves direct, personal and fiduciary relations with the client.
  • The practitioners collectively have a particular sense of responsibility for maintaining the competence and integrity of the occupation as a whole.
  • The practitioners tend or are required to avoid certain methods of attracting business.
  • The practitioners are organised in bodies which, with or without state intervention, are concerned to provide machinery for testing competence and regulating standards of competence and conduct.

Of those indicia, only 1. and 7. were considered to be essential, and they were the only two specifically addressed by the tribunal. Although these indicia may be useful, we consider that the tribunal gave them undue weight in the “Reflexologists” case.

In our view, a more balanced approach to the above indicia was adopted by the tribunal in the case of the “Institute of Legal Cashiers and Administrators (LON/93/2444A)”. Here the tribunal concluded that while… “We have every sympathy with the desire to bring some objectivity to the application of the law which Mr Smouha has urged upon us by adopting more or less the criteria used by the Monopolies Commission in 1970, …. we do not see ourselves as entitled to do more than bear those criteria in mind.”

In the Institute’s case, the members were employed as legal cashiers or administrators in solicitors’ offices. It claimed to be a professional association under “Item 1(b)” on the grounds that either it satisfied the Monopolies Commission’s criteria, which outweighed the “Carr” Test, or because the work done by the Institute’s members was part of the recognised professional skill of solicitors. The tribunal rejected both arguments: the members’ skills were considered too “technical” and “constricted” to be consistent with the character of a profession; and the services that the members performed were incidental to legal practice but did not amount to practice of the law itself.

The indicators used by the tribunal in the Institute’s case were:

* the technical content and nature of the skill;
* whether or not the members’ functions were incidental to a recognised profession;
* whether the members were involved in fiduciary relationships to clients.

Committee of Directors of Polytechnics

In “Committee of Directors of Polytechnics (High Court CO/755/91)” the High Court rejected the Committee’s claim for exemption under “Item 1(b)” on the grounds that there was no such profession as being a director of a polytechnic. The members of the Committee all had various qualifications but these were not qualifications fitting them for practice of a single, recognised profession. The distinction was made between a professional association and an association of professionals.

Approach to take

Remember, none of the cases listed above should be regarded as laying down a legal or definitive test of the criteria of a profession. Your starting-point should be to consider whether the man in the street would regard the occupation as a profession when made aware of what the occupation actually entails. The indicators described above are various elements attaching to the occupation which may, or may not, be present in any given case and which the tribunals have considered would enter into the ordinary reasonable man’s consideration of the matter. They are to be taken into account in conjunction with consideration of the association’s aims and objectives and the actual activities that it carries out.