United Grand Lodge of England v The Commissioners for HMRC

For the VAT exemption for non-profit organisations with philosophical, philanthropic or civic aims, an organisation may have more than one main aim. A practical activity motivated by a philosophy is not necessarily an inherent part of that philosophical aim. Relief directed principally to members and their dependants who have contributed to the organisation may amount to a separate main aim and is not philanthropic where it is essentially a redistribution of members’ contributions. Charity status and public benefit under charity legislation do not determine whether an aim is philanthropic for VAT purposes.

The Appellant appealed against the FTT’s dismissal of claims for repayment of VAT charged on membership subscriptions. The claims relied on Article 132(1)(l) of the Council Directive 2006/112/EC and Item 1(e) of Group 9 of Schedule 9 to the Value Added Tax Act 1994.

The FTT found that the Appellant had a philosophical main aim and a separate main aim of providing Relief. Relief included support for Freemasons and their dependants in distress. The Upper Tribunal had to decide whether the FTT failed to give adequate reasons for rejecting the case that all activities served one philosophical aim, and whether member-focused Relief was philanthropic.

1. Ground 1 allowed in part. The FTT had identified the correct task: to identify the organisation’s aims and determine which were main or primary aims. It was not required to address every submission, but it had to explain why it rejected the important case that the Appellant had one sole philosophical main aim and that Relief was merely a manifestation of it. The FTT did not give that explanation and therefore erred in law.
2. The Upper Tribunal nevertheless rejected that argument on the FTT’s findings. A philosophical aim is tested against what the organisation does in practice, but Institute of the Motor Industry v CCE concerned an aim whose practical implementation was inherent in the aim itself. It did not establish a general rule that every practical activity motivated by a qualifying aim forms part of that aim. Teaching, instilling and promoting a philosophy may achieve a philosophical aim without every practical manifestation of the philosophy being subsumed within it.
3. The provision of Relief could therefore be a separate aim. The FTT’s finding that Relief was of at least equal importance to the philosophical aim meant that it was not subsidiary, subservient or merely facilitative. That factual finding was open to the FTT and disclosed no basis for appellate interference.
4. Ground 2 dismissed. Relief directed essentially to Freemasons and their dependants who had contributed to the organisation was inward-looking and lacked the benevolence towards mankind at large characteristic of philanthropy. The relevant consideration was the Appellant’s purpose in collecting and applying funds, not the individual motives of contributors. Benefits to members arising collaterally from wider community objects could be philanthropic, but that was materially different from raising funds within the membership for redistribution to members and dependants.
5. Charitable status, charitable objects and public benefit under the Charities Act 2011 did not automatically determine the meaning of philanthropic in the VAT exemption. The Upper Tribunal set aside the FTT’s decision, remade it, and dismissed the Appellant’s appeal against HMRC’s decision.

• Upper Tribunal (Tax and Chancery Chamber): The FTT’s decision was set aside because it failed to give adequate reasons on one important aspect of the Appellant’s case. The Upper Tribunal remade the decision and dismissed the appeal.
• First-tier Tribunal (Tax Chamber): The Appellant’s appeal against HMRC’s refusal of VAT repayment claims was dismissed: [2021] UKFTT 308 (TC).