Eynsham Cricket Club v Commissioners of HM Revenue and Customs

Value added tax – Zero-rating – Construction works – Appellant cricket club appealing against decision of respondent commissioners that appellant not entitled to zero-rating on construction works – Whether construction of cricket pavilion by cricket club zero-rated – Whether cricket club a “charity” for VAT purposes – Whether pavilion having intended use as village hall or similarly in providing social or recreational facilities for local community – Whether EU law principles of equal treatment or fiscal neutrality applying – Appeal dismissed The appellant was a local village cricket club in Oxfordshire. It had been registered with HMRC as a community amateur sports club (CASC) since 2003. On 20 February 2012, the appellant’s existing pavilion was destroyed by fire in a suspected arson attack. After an extensive fundraising effort, the appellant engaged a contractor to build a new pavilion. HMRC decided that the appellant was not entitled to benefit from zero-rating of the relevant construction services which were supplied to it for the building of the new pavilion. The constitution of the appellant described its objectives as including the promotion of participation within the local community in healthy recreation by the provision of facilities for the playing of cricket and the promotion of the appellant within the local community and within cricket. It had both playing members and non-playing members. The appellant appealed against a decision by the First-tier Tribunal (FTT) dismissing its appeal against the refusal to treat the construction services as zero-rated under item 2 in group 5 of Schedule 8 to the Value Added Tax Act 1994, which provided for zero-rating to apply to the supply in the course of the construction of a building intended for use only for a “relevant charitable purpose”. The FTT found that the appellant was not “established for charitable purposes only” because, although it was established for a charitable purpose, namely “the advancement of amateur sport” within section 3(1)(g) of the Charities Act 2011, it was also established for a subsidiary purpose of providing social facilities to the residents of Eynsham. The FTT found that such a subsidiary purpose was not a charitable purpose within section 3 of the 2011 Act and consequently the club was not “established for charitable purposes only” for purposes of the definition of “charity” in Schedule 6 to the Finance Act 2010. Held: The appeal was dismissed. (1) It was common ground that the purpose of Schedule 6 to the Finance Act 2010 was to provide a new definition of “charity” for tax purposes which was distinct from the definition of “charity” for the purposes of charity law generally. Hence Schedule 6 did not simply cross-refer to the definition of charity in section 1 of the Charities Act 2011. Schedule 6 adopted a definition of charity that was both wider in some respects and narrower in others than the definition of charity in the 2011 Act. It was apparent on the face of Schedule 6 that there were two different definitions of charity set out in the 2010 and 2011 Acts, and that Parliament had deliberately enacted two separate definitions which were relevant to separate matters. In context, it was possible to interpret Schedule 6 in such a way as not to have the unintended and anomalous effect of enabling a CASC to benefit from the tax reliefs available to charities while at the same time not being obliged to submit to the regulatory and other requirements applicable to them. Paragraph 1(1)(a) of Schedule 6 to the 2010 Act required that a body qualifying as a charity “was established for charitable purposes only”. The effect of section 6 of the 2011 Act was that a CASC, even if its purposes were charitable purposes, “is to be treated as not being so established”. There was nothing in section 6 which confined its effect to the operation of the 2011 Act. There was no reason why it should not be regarded as a statement of the general law. The same applied to para 1(1)(a) of Schedule 6. Even without an express cross-reference to section 6 of the 2011 Act, its effect was that a CASC such as the appellant was (for all purposes) to be treated as not established for charitable purposes. It therefore could not satisfy the requirement in para 1(1)(a) that it was established for charitable purposes only. (2) There was no principle of law that use by a local sports club could not be regarded as use by the local community. If, as here, the club was established for the purpose of providing sporting facilities for the members of a local community, use by the members of the club did not cease to be community use. The findings of fact that the FTT made were open to them and, on those findings, they were correct to hold that the pavilion was intended for use by the appellant solely for the purpose of providing social or recreational facilities to the local community. It was necessary to look at all the relevant circumstances. Excessive use for commercial purposes could be a bar, as could restriction of use to a limited category of persons, but none of those features appeared to be present in this case. A facility primarily designed for use by the club’s members and owned and controlled by the club was not a bar to the facility being “intended for use solely as a village hall or similarly”: Jubilee Hall Recreation Centre Ltd v Commissioners of HM Revenue and Customs [1998] PLSCS 329; [1999] STC 381, Yarburgh Children’s Trust v Commissioners of HM Revenue and Customs [2002] STC 207 and Caithness Rugby Football Club v Commissioners of HM Revenue and Customs [2016] UKUT 354 (TCC); [2016] PLSCS 238 applied. (3) The principle of fiscal neutrality could not be extended to the recipient of supplies. The principle focussed on whether the supplies were objectively similar from the perspective of the typical consumer, so inevitably the focus had to be on the position of the traders in question. As far as the principle of equal treatment was concerned, a body that was a charity and a body that was not were not objectively the same. John Brinsmead-Stockham (instructed by Hogan Lovells International LLP) appeared for the appellant; Howard Watkinson (instructed by the General Counsel and Solicitor to HM Revenue and Customs) appeared for the respondents. Eileen O’Grady, barrister Click here to read a transcript of Eynsham Cricket Club v Commissioners of HM Revenue and Customs