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HMRC internal manual

VAT Youth Clubs

HM Revenue & Customs
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Youth clubs: Youth Clubs and associations of Youth Clubs: The meaning of youth club: Meaning of Note 1(e) of Schedule 9, Group 6, Item 6

The case of Hangleton Farm Education Ltd (LON/03/1147) has provided us with a legal interpretation of the meaning of Note 1(e). Hangleton Farm had for many years provided horse riding tuition and livery services on a profit-making basis. The trader set up of a body that was constitutionally a non-profit making body, but was in reality covertly distributing profits to the director of a profit making company by way of a licence fee, in an attempt to be an eligible body under Note 1(e) to gain exemption for its supplies of tuition under Item 1 of Group 6 to Schedule 9. The tribunal chairman applied the principles of what constitutes a non profit-making body established in the ECJ case of Kennemer Golf and Country Club ([2002] STC 502) and found that, although the appellant was precluded from distributing profits in its memorandum and articles of association, in practice it distributed profits for VAT purposes by paying a licence fee to the director of the profit-making company. Therefore, as the appellant was considered not to fall under Note 1(e) the appeal was dismissed.

This tribunal decision supports our view that it is important to examine both the contractual arrangement and the substance of any arrangements when considering whether a trader falls under Note 1(e)