VAT – Treatment of Representative Bodies

Introduction

The Facts

The British Association for Shooting and Conservation Limited (“BASC”) primary purpose was to act as a representative body for those engaged in shooting.

It had about 130,000 members who pay an annual subscription. In return for their subscriptions, members receive a magazine and insurance cover. In addition they receive members’ advisory service and representation of the sport. It was common ground that part of the subscription was attributable to the zero-rated supply of magazines, and another part to the exempt supply of making insurance arrangements. The issue on this appeal is the correct VAT treatment of the rest.

While its primary objective was representing members, it was also involved in the following:

• conservation, coupled with land management;
• public education role;
• represents the UK government in European negotiations

It was found as fact that there was a direct link between the remaining subscription income and the above activities.

The VAT & Duties Tribunal decided that the residual subscription income was the consideration for a standard-rated supply and was therefore VATable. BASC appealed to the High Court.

The Issue

Whether, in accordance with the EU VAT Directive, the supplies by BASC were either:

• supply of services and goods closely linked thereto for the benefit of their members in return for a subscription fixed in accordance with their rules by non-profit-making organisations with aims of a political, trade-union, religious, patriotic, philosophical, philanthropic or civic nature, provided that this exemption is not likely to cause distortion of competition;
• certain services closely linked to sport or physical education supplied by non-profit-making organisations to persons taking part in sport or physical education.

The Decision

The High Court found in favour of the taxpayer that the residual income was not VATable.

In reaching this decision, the two exceptions above were examined.

Sport

This exception was dealt with first.

It was noted in the judgment that in order to come within this exception the taxable person must show:

1. That it was a non-profit-making organisation;
2. That it made supplies of services;
3. That the services were supplied to persons taking part in sport;
4. That the services were closely linked to sport; and
5. That the supply was essential to the transactions exempted.

The Judge examined the VAT Tribunal decision, which found that the activities did not fall under this exception as there was insufficient link between the supplies and the subscribers. He allowed the taxpayer's appeal and remitted the case to the Tribunal for further consideration.

Civic or Political Aims

The second exception was then examined. It was noted in the judgment that in order to come within the political or civic purposes exception the taxable person must show:

1. That it was a non-profit-making organisation;
2. That it made supplies of services;
3. That the services were supplied for the benefit of its members;
4. That the services were supplied in return for a fixed subscription;
5. That the aims of the organisation were of a political, trade-union, religious, patriotic, philosophical, philanthropic or civic nature.

The main debate was over the last of the conditions. In effect, this debate boiled down to two questions:

1. How were you to ascertain the “aims” of an organisation and
2. Were the aims of BASC “civic” or “political” in nature?

The Tribunal had found it impossible to conclude that BASC's primary objects were of a political nature. The High Court could see no legal error in that conclusion.

On the basis of the first exception (sport), the Court allowed the taxpayer's appeal and remitted the case to the VAT Tribunal.

The judgment is available online at http://www.bailii.org/ew/cases/EWHC/Ch/2009/399.html.