VATWELF3032 - Welfare services: VAT Liability of School Holiday Clubs

The First-tier Tribunal (FTT) reached its decision in RSR Sports Limited (RSR) (Decision No TC07453) on 7 November 2019. HMRC’s policy following that case was previously reported in Revenue and Customs Brief No 18 of 2020.

RSR provided holiday camp services to parents and their children and argued that these services were exempt from VAT as the provision of welfare during the school holidays. HMRC refused RSR’s claim for repayment on the basis that holiday camps were activity based and the supply was not one of welfare.

VATWELF3030 says that examples of exempt services can include day care services such as those provided by a nursery, playgroup or after school club (but not activity based clubs such as dance classes etc). Further, that the attendance of children at activity centres, participation in football lessons or dance classes and the provision of tuition are examples of activities that do not constitute the provision of care and protection services to children and young persons.

However the FTT found in RSR that:

  • RSR was OFSTED registered and the holiday camps were supervised by OFSTED
  • the holiday camps included both an activities element and a childcare element
  • the activities element was emphasised by RSR in order to make the holiday camp attractive to potential consumers
  • the activities at the holiday camps were supervised but there was no coaching or teaching of the relevant skills which differed from the after-school clubs that RSR also provided
  • there was a much greater degree of staff qualification in the after school clubs, emphasising the difference between the two

The FTT then considered whether the predominant element of the holiday camps was childcare or activities and concluded that it was the former although the answer was finely balanced.

In RSR, the childcare element was not incidental to and subservient to the activities that were being offered to the parents and children.

RSR could therefore be distinguished from Sports Academies (Decision No TC05171), a case where the tribunal had held that the activities element predominated.

The important key features were:

  • the members of staff were merely supervising activities
  • they did not hold any coaching or teaching qualifications
  • there was no external standard to which the services were being provided
  • the activities were merely an adjunct to the essential service which was childcare

Other providers supplying services can similarly exempt their supplies where the facts demonstrate that they qualify and exhibit the key features set out by the FTT in RSR.

HMRC no longer interprets activity-based clubs to include those clubs exhibiting these key features. Such clubs can therefore, qualify for the welfare exemption if they otherwise meet the conditions.