Eynsham Cricket Club v HMRC

This appeal concerned whether construction services supplied in building a new cricket pavilion to a registered community amateur sports club (CASC) qualified for zero-rating under Item 2, Group 5, Schedule 8 to the Value Added Tax Act 1994. The central legal question was whether the Club could be a "charity" for VAT purposes under paragraph 1, Part 1, Schedule 6 Finance Act 2010 when section 6 of the Charities Act 2011 deems a registered sports club established for charitable purposes "to be treated as not being so established".

The Court of Appeal held that section 6 CA 2011 operates as a deeming provision of general effect: a registered CASC is to be treated, for all purposes, as not established for charitable purposes and therefore cannot satisfy the charitable-purpose condition in paragraph 1 Schedule 6 FA 2010. As a consequence the Club could not qualify for zero-rating of the building services. The court also rejected the Club’s reliance on the EU principles of equal treatment and fiscal neutrality: the differential VAT treatment was founded on distinct domestic regulatory regimes (charity registration versus CASC registration), and that difference was an objective and proportionate justification for different tax treatment.

Background and parties: Eynsham Cricket Club (an unincorporated local amateur cricket club registered with HMRC as a CASC) appealed after HMRC refused to allow zero-rating of construction services provided in rebuilding its pavilion following a fire. The First-tier Tribunal made findings favourable to the Club on several points but (initially) concluded it was not established for charitable purposes only. HMRC conceded an error on that aspect at Upper Tribunal preliminary stage. The Upper Tribunal (Nugee J and UT Judge Herrington) held the Club was not a charity for VAT purposes and dismissed the Club’s appeal; the Club appealed to this court.

Nature of the claim: The Club sought a declaration/relief that the construction services supplied were zero-rated for VAT under Item 2, Group 5, Schedule 8 VATA, which required the building to be intended for use by a charity for a relevant charitable purpose. The legal questions were (i) whether the Club was a "charity" for the purposes of Schedule 6 FA 2010 given its CASC registration and the effect of section 6 CA 2011, (ii) whether it met other Schedule 6 conditions (jurisdiction, registration, management), and (iii) whether EU principles (equal treatment, fiscal neutrality) required a different result.

Issues framed:

• whether section 6 Charities Act 2011 prevented a registered CASC from being a charity for the purposes of Schedule 6 Finance Act 2010;
• whether the Club satisfied the jurisdiction, registration and management conditions in Schedule 6 FA 2010;
• whether domestic treatment breached EU principles of equal treatment or fiscal neutrality.

Court’s reasoning and findings: The court applied conventional purposive statutory interpretation. It concluded that section 6 CA 2011 is a deeming provision expressed in general terms and therefore operates for all purposes unless expressly disapplied; Schedule 6 FA 2010 contained no provision disapplying section 6. The combined statutory and legislative history showed that Parliament had deliberately created a clear divide between CASCs and charities from 1 April 2009 onwards so that a CASC could not be a charity and thereby avoid regulatory burdens. Schedule 6 FA 2010 created a distinct tax definition of "charity" but did not indicate any intent to reverse that divide. Therefore the Club could not satisfy the charitable-purpose condition in paragraph 1 Schedule 6 and so could not claim zero-rating.

On EU principles the court held the equal treatment and fiscal neutrality arguments failed. The differential treatment related to distinct domestic regulatory choices and regimes (charity registration and its burdens versus CASC registration and more limited tax reliefs); those differences were objective and provided justifications for differential VAT treatment. The principle of fiscal neutrality was not to be extended to require identical VAT treatment of recipients rather than supplies in this context.

Appeal dismissed. The Court of Appeal held that section 6 of the Charities Act 2011 operates as a general deeming provision so that a registered community amateur sports club is to be treated as not established for charitable purposes and therefore cannot satisfy the charitable-purpose condition in paragraph 1 Schedule 6 Finance Act 2010. Consequently the Club could not claim zero-rating for the construction services; further, EU law principles of equal treatment and fiscal neutrality did not require a different outcome because the differing domestic regulatory regimes provided objective justification for different VAT treatment.

Appeal from the Upper Tribunal (Tax and Chancery) (UT 2018/0038), Upper Tribunal judgment dated 1 October 2019; prior First-tier Tribunal decision (revised decision dated 29 December 2017).