The Commissioners for HMRC v Yorkshire Agricultural Society

For the VAT exemption for charitable fund-raising events, “primary purpose” means the event’s single main purpose, rather than any merely important purpose. An event may nevertheless satisfy that requirement where fund-raising is inextricably intertwined with the furtherance of the charity’s purposes and, viewed factually, forms part of its primary purpose.

A statutory condition requiring an event to be promoted as being primarily for fund-raising is incompatible with the Principal VAT Directive. It may be interpreted conformingly by removing “primarily”, so that the event must be promoted as being for fund-raising. A conforming interpretation must accord with the grain or underlying thrust of the legislation.

The Yorkshire Agricultural Society claimed repayment of VAT paid on admission supplies for the 2016 Great Yorkshire Show. The First-tier Tribunal allowed the claim, holding that the show satisfied Item 1 of Group 12 of Schedule 9 to the Value Added Tax Act 1994. HMRC appealed in relation to the 2016 repayment claim.

The appeal concerned whether fund-raising was the show’s primary purpose under Item 1(b), and whether the promotion condition in Item 1(c) was compatible with Article 132(1)(o) of the Principal VAT Directive. The Upper Tribunal also considered whether a conforming interpretation under Marleasing was available.

1. Ground 1 dismissed. Item 1(b) requires an event whose single primary or main purpose is the raising of money. It is not satisfied merely because fund-raising is one important purpose. The FTT therefore erred in law in adopting that alternative construction.

2. The FTT’s other conclusion was available in law and on the facts. Item 1(b) may be satisfied where fund-raising and the pursuit of the charity’s purposes are inextricably intertwined, so that the primary purpose consists of fund-raising in that context. The FTT was entitled to find that the two purposes could not sensibly be separated or ranked and that the show’s annual nature was relevant but not determinative.

3. Ground 2 dismissed. Article 132(1)(o) of the Principal VAT Directive contains no requirement that a qualifying event be promoted as being primarily for raising money. Item 1(c) imposed an additional restriction which narrowed the subject-matter of the exemption and was therefore ultra vires.

4. Article 132(2) did not justify the promotion condition. The examples in that provision indicate restrictions directed to the operation of the exemption, particularly the avoidance of distortion of competition. HMRC had produced no concrete evidence that the promotion condition was necessary. Article 131 likewise did not permit a condition which narrowed the exemption or introduced additional uncertainty without objective and verifiable justification.

5. The Marleasing obligation permits a conforming interpretation which departs from literal wording, provided that it remains compatible with the legislation’s grain or underlying thrust and does not cross the boundary from interpretation into amendment. Interpretation 2 was permissible: Item 1(c) requires that the event be promoted as being for raising money, but not that it be promoted as being primarily for that purpose. Whether complete deletion of Item 1(c) would also have been permissible was left undecided.

6. The show satisfied the conformingly interpreted Item 1(c) on the FTT’s findings. The appeal against the FTT’s decision allowing the 2016 repayment claim was dismissed. The Tribunal did not determine whether Article 132(1)(o) had direct effect.

• Upper Tribunal (Tax and Chancery Chamber) — dismissed HMRC’s appeal against the First-tier Tribunal’s decision allowing the Society’s 2016 VAT repayment claim.
• First-tier Tribunal (Tax Chamber) — allowed the Society’s appeal against HMRC’s refusal of repayment for 2016 and against the 2017 assessment. HMRC appealed only in relation to the 2016 repayment claim.