Eastbourne Town Radio Cars Association v. Commissioners of Customs & Excise

The House of Lords held that an unincorporated association can be a taxable person for value added tax purposes where, under its rules, it provides facilities or advantages to its members for a subscription or other consideration (section 94(2)(a) of the Value Added Tax Act 1994). The association's payment structure and constitution were treated as creating a direct link between the services provided through staff and the members' payments, making those services taxable supplies (sections 4 and 5 of the Act). The court applied the commercial reality test and refused to allow contractual form or label alone to exclude VAT liability.

The appellant was an unincorporated association of private hire drivers which provided, through employed staff, advertising, radio and telephone facilities and related services to its members. The association had been registered for VAT in 1991. After a revision of its constitution in 1994 emphasising that employees were engaged on behalf of the members and that contributions were to meet members' shares of expenses, the association sought cancellation of its VAT registration on the basis that it no longer made supplies for VAT purposes.

The Commissioners refused cancellation; that decision was upheld by the London VAT Tribunal, set aside by Turner J ([1996] STC 1469) and restored by the Court of Appeal ([1998] STC 669). The appellants appealed to the House of Lords.

The central legal question was whether the association, despite being unincorporated and despite contractual terms suggesting the members (rather than the association) employed staff, was nonetheless making taxable supplies of services to its members in the course of a business. The Lords considered the statutory scheme (notably sections 3, 4, 5 and 94 of the Value Added Tax Act 1994) and relevant authorities, emphasising that the statutory concept of a "supply" and commercial reality may differ from private law labels. The court identified two indicia for an association making taxable supplies: (i) the existence of an association (rules, governance, admission and disciplinary provisions, continuity) and (ii) provision of the facility in accordance with those rules for a payment into the association's funds.

The Lords concluded that the Association satisfied those indicia: its constitution and bye‑laws governed members' rights to services, subscriptions were paid into the association's funds, and there was a direct link between the services supplied through staff and members' payments. Consequently the services were taxable supplies, the turnover exceeded the registration threshold, and the association was properly required to be registered for VAT. The court therefore dismissed the appeal.

The Lords noted that different facts might produce a different result and that each case must be decided on its own circumstances; they applied the commercial reality test rather than accepting formal contractual labels alone.

Appeal dismissed. The Lords held that the unincorporated association made taxable supplies of services to its members under the association's rules and for consideration (section 94(2)(a) and sections 4 and 5 of the Value Added Tax Act 1994); the connection between members' payments and services rendered meant the association was required to be registered and liable for VAT.

The Commissioners refused the association's application for cancellation; that decision was upheld by the London VAT Tribunal, set aside by Turner J ([1996] STC 1469), and reinstated by the Court of Appeal ([1998] STC 669) before the appeal to the House of Lords.