Value added tax – Zero rating – Relevant charitable purpose – Appellant charitable community association constructing new building comprising mainly changing room facilities and equipment storage area – Appellant commissioners refusing confirmation that construction works zero-rated for VAT purposes – First-tier Tribunal dismissing appeal – Appellant appealing – Whether being used as village hall or similarly in providing recreational facilities – Appeal dismissed
The appellant was a charitable community association whose purpose was the advancement of community development for the benefit of the residents of New Deer and Parish, Aberdeenshire. Its objects included maintaining and managing the village Hall and pleasure park for activities promoted by it and its constituent members. The village hall was a Victorian style of building used for a variety of sporting and other community activities. The pleasure park was a sports pitch on which there was a small hut providing changing facilities.
The appellant decided that the changing hut was unsatisfactory and the pitch was often unusable because of the weather and constructed a new building comprising an entrance area and foyer, four changing rooms with adjoining shower area and WC, two smaller “referee rooms”, each with a shower, three WCs, including one disabled WC, accessed from the foyer and a meeting room/kitchen accessed from the entrance area. There was also an adjacent equipment storage area/garage with no access from the interior of the building. The building was used by persons participating in sports activities on the adjacent pitch, including the New Deer Football Club which was responsible for cleaning and maintaining the building.
The appellant subsequently confirmation by the respondent commissioners that construction works of the new building would be zero-rated for VAT purposes. The respondents refused to treat the works as zero-rated. The appellant appealed to the First-tier Tribunal (FTT) which upheld the respondents’ decision and refused the appeal on the grounds that the uses that could reasonably be carried out within the building, given its design and construction, took it outside the description of use as a village hall or similarly in providing sporting or recreational activities for the local community. Accordingly the use was not for a relevant charitable purpose eligible for zero-rating within Group 5, Item 2, Note (6)(b) of Schedule 8 to the Value Added Tax Act 1994.
The appellant appealed to the Upper Tribunal contending that the FTT had erred in law in its construction of Note (6)(b). By requiring a large multipurpose hall as a principal feature, the tribunal had unduly restricted the scope of the statutory provision. Further, the tribunal had erred in holding that only the meeting room/kitchen was capable of use similar to a village hall in providing social or recreational facilities for the local community. The use of the changing rooms for changing constituted use for a social or recreational purpose because sports activities on the pitch could not take place unless changing facilities were provided for players and referees. The word “similarly” in Note (6)(b) encompassed use for such a purpose.
Held: The appeal was dismissed.
(1) As the words “or similarly” related back to the word “use”, inquiry had to focus upon whether the use or intended use of a building was similar to use of a building as a village hall, rather than whether the building was similar to a village hall. The need for local use was made clear by the reference in sub-paragraph (b) to provision of social or recreational facilities “for a local community”. The reference to use similar to that of a village hall therefore had to be to something other than use by or for persons who lived in the vicinity of the building. It was also clear that something more was required than mere use for the provision of social or recreational facilities for the local community. Attention had to focus on the nature of the activities conducted, or intended to be conducted, in the building. The question was whether those were similar to the type of social or recreational activities that one would expect to be conducted in a village hall for the benefit of a local community. That would inevitably depend upon the facts and circumstances of each case. It was not necessary that there should be a mix of activities such as one might find carried on in a traditional village hall. The sub-paragraph merely required use similar to, not the same as, that of a village hall. The carrying on of a mix of activities might be favourable to a finding that the use of a building was similar to that of a village hall, but a single use might, depending upon circumstances, qualify if it consisted of providing social or recreational facilities for the local community. The difficulty for the appellant in the present case was that the building was not itself, subject to a de minimis exception for occasional use of the meeting room/kitchen or the entrance/foyer area, used in providing social or recreational facilities, but was used rather as an adjunct to the social or recreational facilities provided for the local community by the sports pitch; Ormiston Charitable Trust (1994, Decision No 13187), Jubilee Hall Recreation Centre Ltd v Commissioners of Customs and Excise [1999] STC 381, South Molton Swimming Pool Trustees (1999, Decision No 16495), Sport in Desford [2004] UKVAT V18914 and Caithness Rugby Football Club [2015] UKFTT 378 (TC) considered.
(2) The FTT had focused correctly upon the potential uses of the building itself rather than on its facilitation, in turn, of use of the sports pitch, whether in its present form or after it had been developed as an all-weather facility. The design of the building was relevant to the extent that it dictated what uses were reasonably practicable. On the evidence, the FTT had been entitled to find that a building used primarily to provide changing room facilities and storage for sporting equipment was not used as a village hall or similarly. It was correct to hold that the statutory definition would be extended to an unacceptable length if it were suggested that any room used for social or recreational activities could be used as a village hall or similarly.
Whilst the Upper Tribunal did not share the FTT’s view that the existence of a large multipurpose hall was a necessary feature in order to meet the legislative test (although it was likely to be a favourable indicator if present) that observation had not been not critical to the FTT’s conclusion that the building in the present case failed to meet the test.
Charles Rumbles (of CKR VAT Consultancy Ltd) appeared for the appellant; Julius Komorowski, Advocate (instructed by the Office of the Advocate General for Scotland) appeared for the respondents.
Eileen O’Grady, barrister
