Expert Witness Institute v Customs and Excise Comrs

A VAT exemption must be construed strictly because it is an exception to the general charge. Strict construction nevertheless requires a fair interpretation of the words used. It does not require the court to choose their narrowest possible meaning.

Objects of a civic nature are not confined to local or municipal matters. They include objects pertaining to citizenship nationwide and, more particularly, objects promoting the relationship between citizens and the state. Supporting the proper administration of justice and the early resolution of disputes through fair and unbiased expert evidence are civic objects.

The character of an organisation’s object depends on what that object is, rather than why its members pursue it. Members may therefore charge for their professional services without depriving a non-profit-making organisation of the exemption.

The Commissioners decided that services supplied by the Expert Witness Institute to its members in return for subscriptions were not exempt from VAT. The London VAT and Duties Tribunal confirmed that decision. It held that the Institute was neither a qualifying professional or knowledge-based association nor an organisation with aims of a civic nature.

Lloyd J allowed the Institute’s appeal in [2001] 1 WLR 1658. He held that supporting the administration of justice was an aim of a civic nature within article 13A(1)(l) of the Sixth Council Directive and the corresponding domestic exemption.

The Commissioners appealed. The central issue was whether “civic” was confined to local or municipal objects, or extended to objects pertaining to citizenship, and whether the Institute’s objects fell within that meaning.

1. Appeal dismissed unanimously. Chadwick LJ delivered the leading judgment. Longmore LJ gave a concurring judgment and Harrison J agreed. The Institute’s supplies to its members fell within the exemption for a non-profit-making body with objects of a civic nature.

2. The words specifying an exemption under article 13 of the Sixth Council Directive must be construed strictly because the exemption departs from the general principle that turnover tax is levied on services supplied for consideration. Strict construction is not synonymous with adopting the narrowest available meaning. The court must give the exempting words a meaning which they fairly and properly bear. If doubt remains after fair interpretation, the supplier has not established the exemption. The court must not strain the language to fill a perceived legislative lacuna.

3. The expression “aims of a civic nature” in article 13A(1)(l), and the corresponding expression in paragraph (e) of item 1 of Group 9 in Schedule 9 to the Value Added Tax Act 1994, are not confined to local or municipal aims. “Civic” can refer to citizens or citizenship nationwide. The other language versions placed before the court supported that construction. Longmore LJ added that, in this context, civic objects promote the relationship of citizens with the state.

4. The decisions in Institute of Leisure and Amenity Management v Customs and Excise Commissioners [1988] STC 602 and Committee of Directors of Polytechnics v Customs and Excise Commissioners [1992] STC 873 did not decide that civic aims necessarily had municipal connotations. Neither court had addressed whether the expression included aims pertaining to citizenship. Those decisions therefore did not govern the present issue.

5. The proper administration of justice is a central element of the relationship between the state and its citizens. Fair and unbiased expert evidence promotes that object and may also facilitate the early resolution of disputes. The Institute’s primary object was therefore civic in nature.

6. The fact that individual members charged for their services did not alter the character of the Institute’s object. The relevant questions concerned the nature of the organisation’s objective and the objective of the non-profit-making organisation itself, rather than the motives or remuneration of individual members. No additional requirement of altruism could be imposed.

1. Court of Appeal: Dismissed the Commissioners’ appeal unanimously and affirmed the High Court’s conclusion that the Institute had objects of a civic nature.
2. High Court, Chancery Division: Lloyd J allowed the Institute’s appeal from the VAT and Duties Tribunal, holding in [2001] 1 WLR 1658 that supporting the administration of justice was an aim of a civic nature.
3. London VAT and Duties Tribunal: Confirmed the Commissioners’ decision that the Institute’s supplies were not exempt. It held that the Institute’s aims were not of a civic nature and rejected its claims under the professional-association and advancement-of-knowledge provisions.
4. Commissioners of Customs and Excise: By letter dated 12 July 1999, decided that the Institute’s supplies of goods and services were not exempt supplies for VAT purposes.