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HMRC internal manual

VAT Trade Unions and Professional Bodies

HM Revenue & Customs
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Trade unions and professional bodies: Item 1(c) branch of knowledge / professional expertise: Primary purpose

“Item 1(c)” requires the “advancement” of a “branch of knowledge” or “fostering of professional expertise” to be an association’s “primary purpose”: otherwise the association does not qualify for exemption. This does not have to be the sole purpose but we interpret it as meaning the main or principal purpose.

In the determination of what constitutes the primary purpose of an organisation, the Upper Tribunal, in “British Association of Leisure Parks, Piers and Attractions Ltd (FTC/15/2012)”, outlined a number of legal principles derived from the meaning or effect of the exemption (in this case it was Item 1(d) that was under consideration). These principles were partly found in the decisions of “British Association for Shooting and Conservation Ltd [2009] EWHC 399” and European Tour Operators Association [2012] UKUT 377. The principles are:

  • in construing the exemption, the court should adopt a strict but not a strained approach; a strict approach is not to be equated with a restricted approach; a court should not reject a claim relying on the exemption where the claim comes within a fair interpretation of the words of the exemption because there is another, more restricted meaning of the words which would exclude the supplies in question;
  • the reference to “primary purpose” doesn’t not have to be the sole purpose of a body, but it must be its main or principal purpose;
  • a body can have multiple objects so that no single object is predominant or the primary purpose;
  • the primary purpose test involves an objective enquiry, not a subjective one; this is to be determined primarily by examination of the body’s constitution (or other materials) and what it does in practice; the subjective views of the officers or members of the body may throw some light on the objective enquiry but they are not determinative of the issue.

In our view, an association can only have one “primary purpose”. This is in contradiction to the findings of the tribunal in the case of the “Allied Dancing Association Ltd (MAN/91/84)”.

The Allied Dancing Association was an association of teachers of dance. It claimed exemption under “Items 1(b)” and “1(c)” of “Group 9”. Having found that exemption under “Item 1(b)” was applicable, the tribunal went on to find that the Association had three primary purposes within “Item 1(c)”:

I turn to Item 1(c). I find that the Appellant’s primary purposes are threefold, namely

(a) conducting examinations as a result of which either persons who are not members of the Appellant become such members (i.e. Associates) or persons who are members of the Appellant become members of a higher grade or standing (i.e. Members or Fellows), 
(b) conducting examinations in which members’ pupils are the candidates and, if successful, qualify in the grades applicable to the examinations and 
(c) disseminating information to its members for the purpose of keeping them instructed and informed on matters relating to their occupations.

In my judgement none of those purposes can fairly be described as the advancement of a particular branch of knowledge, but each of them is accurately described as the fostering of professional expertise connected with the professional employments of the Appellant’s members.

We do not accept this part of the decision. The three primary purposes identified by the Chairman are, in our view, actually activities performed by the Association and therefore represent the means by which its purposes are achieved rather than the purposes themselves. However, the case was not appealed further because we accepted the finding of exemption under “Item 1(b)”. It remains our policy that an association can only have a single “primary purpose” and any claims from an association to have more than one should initially be resisted.

It is likely that if the tribunal had had the benefit of the later decisions referred to above it may have reached a different conclusion.