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HMRC internal manual

VAT Trade Unions and Professional Bodies

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Trade unions and professional bodies: Political, religious, patriotic, philosophical, philanthropic and civic bodies

Item 1(e), Group 9, Schedule 9, VATA 1994

Previously subscriptions to religious, political, patriotic, philosophical and philanthropic bodies were treated as received for non-business purposes or outside the scope of VAT.

However, from 1 December 1999, the exemption was introduced for these aforesaid bodies, including those of a civic nature. The purpose was to implement within the UK the exemption in Art 13A.1(l) of the EC Sixth Directive (now Art 132(l) of EU Directive 2006/112). The effect of this implementation was to bring within the scope of VAT those subscriptions which were previously treated as outside the scope of VAT because the benefits provided to members was limited to the right to participate in the body’s management or receive reports on its activities.

To date, the areas that have been contested include those concerning bodies of a philanthropic or civic nature.

Philanthropic body

Rotary International

In the Rotary International in Great Britain and Ireland (“RIBI”) tribunal case it was accepted by both parties that its objectives were in the public domain. What was in dispute was whether the objects were of a philanthropic nature.

It was found as fact that RIBI’s objects which consisted of the provision of administrative and organisational work was to support the activities of Rotary clubs.

The tribunal found that the ideal of Rotary and thus of RIBI is the provision of ‘service’ for the general well being of mankind.

The membership subscription therefore comes within the exemption in Item 1(e).

Game Conservancy Trust

What this case demonstrates is that a body can have aims which are primarily directed at wildlife and still fall within the ambit of the promotion and well being of mankind.

The Trust’s objects involved the conservation, research of and education about game and other associated wildlife.

HMRC considered that the Trust only existed to support the self interest of its members (made up of game shooters, fishermen and farmers) rather than to benefit the general community and that its interest in the habitat of game and non-game species is incidental to its aim of advancing the cause of shooters and fishing.

The tribunal rejected both challenges, finding that the Trust promotes and preserves bio-diversity in the widest sense through the whole game-related sector of the rural ecosystem. Therefore, taking an overall view of the Trust’s objects and activities, the aims are linked to the promotion and well-being of mankind and is thus a body of a philanthropic nature.

Civic body

Expert Witness Institute - Court of Appeal

Expert Witness Institute (“EWI”) was an organisation having members who were experts in professional disciplines and other occupations with the objective of supporting the proper administration of justice and early resolution of disputes using fair and unbiased expert evidence. It provided training for expert witnesses and made representations to government, public and professional bodies.

EWI lodged a tribunal appeal against HMRC finding that its membership subscription was taxable. It argued hat its supplies were exempt as it was an organisation with aims of a civic nature. The tribunal also determined that it was not a professional association (Item 1(b)) or involved in the advancement of a particular branch of knowledge or the fostering of professional expertise (Item 1(c)), however, EWI did not appeal these issues to the High Court.

The tribunal dismissed the appeal, finding that the word ‘civic’ meant ‘locality’ or ‘public affairs’ of which EWI carry out neither. EWI’s appeal to the High Court was allowed. The court finding that civic had another meaning concerning the relationship between the state and its citizens. As EWI’s activities can be described as being for promotion and support of the proper administration of justice, being a core activity of the state could be described as civic in nature. This was seen as the primary aim of EWI.

Institute of Leisure and Amenity Management - High Court

Institute of Leisure and Amenity Management (“ILAM”) had a membership consisting of managers from local authorities or potential managers of organisations providing leisure or educational facilities for members of the public.

In return for the membership fee. ILAM made representation to national bodies, a free monthly journal, conferences, seminars, training etc. HMRC determined that membership fees were taxable. A tribunal found that ILAM was not a professional association (Item 1(b)), nor was its primary purpose the advancement of a particular branch of knowledge (Item 1(c)). It also determined that it was a body of a civic nature.

On appeal to the High Court, while finding that ILAM didn’t come within Item 1(b) and (c), it also found that the term ‘civic nature’ did not include organisation providing everyday and generally expected municipal services such as the provision of parks, leisure centres and similar facilities, therefore its supplies were not exempt.