Weekly VAT News

United Grand Lodge of England: Freemasonry subscriptions not VAT exempt – UT

Relief (alongside Brotherly Love and Truth) is one of the three Grand Principles of Freemasonry and involves Freemasons supporting charities, as well as other Freemasons in need. In 2021, the First-tier Tribunal ruled that the support of other Freemasons (which it saw as one of the main aims of Freemasonry) was a form of self-insurance and was not ‘philanthropic’, meaning that VAT was due on subscriptions. The Upper Tribunal has confirmed that decision. The UT rejected the United Grand Lodge of England’s argument that the provision of Relief was an expression of the philosophy of Freemasonry (a philosophical aim, like a philanthropic one, would potentially qualify for VAT exemption), observing that an “organisation with a philosophical aim does not require, in addition, a practical physical manifestation of any or all of the philosophical principles it promotes” (emphasis in original). The UT endorsed the FTT’s decision that Relief was a separate and equally important ‘main aim’ of Freemasonry, and also considered that supporting other Freemasons was “not philanthropic as it is inward looking, lacking benevolence towards mankind at large or in general”. Although the UT considered that the FTT had not provided full reasons for deciding that Relief was not merely part of a wider philosophical aim, it remade the FTT’s decision to the same effect. VAT was accordingly due on membership fees. (Contact: Nick Comer) 

Realreed Ltd: VAT and serviced accommodation – FTT

Realreed Ltd owns Chelsea Cloisters, which includes over 200 flats that are used to provide serviced accommodation. The services (dry-cleaning, linen changes, Wi-Fi, etc.) are provided by Chelsea Cloisters Services Ltd (CCSL), an affiliated company, and Realreed treated its supplies of the flats, in isolation, as exempt from VAT. The First-tier Tribunal has accepted that the services had been carved out: Realreed promised occupants that ancillary services would be provided, but they were supplied by CCSL. Realreed was therefore (applying Telewest) supplying property. However, the services (even though provided by a third party) should be taken into account when considering whether Chelsea Cloisters was similar to a hotel, and therefore excluded from the exemption. The FTT concluded that Realreed’s supply of short-term accommodation (most people stayed less than 28 days), coupled with CCSL’s additional services, meant that Chelsea Cloisters was an establishment in potential competition with the hotel sector. Consequently, Realreed’s supplies of the flats were subject to VAT, and its appeal against an assessment for £4.8m was dismissed. (Contact: Ben Tennant)

VAT on energy-saving materials – SI

As announced in Autumn Statement 2023, the scope of the VAT zero rate is being extended to include the installation of electrical battery storage, water-source heat pumps, and diverters that enable excess electricity from certain energy-saving materials to be used on site rather than exported to the grid. Specific groundworks necessary for the installation of certain types of heat pumps will also be brought within scope. The scope of the zero rate will also be extended to the installation of qualifying energy-saving materials in buildings used solely for a relevant charitable purpose. The Value Added Tax (Installation of Energy-Saving Materials) Order 2024, with an accompanying tax information and impact note, implements this measure. The changes will apply from 1 February 2024. The zero rate will apply until 31 March 2027, at which time the reduced VAT rate will apply. (Contact: Zoe Hawes)

Movement of goods into the UK from Ireland and other EU member states

As set out in the final version of the Government’s Border Target Operating Model, published in August 2023, from 31 January 2024, goods will face full customs controls when moved directly from Ireland via Irish ports to Great Britain. The Taxation (Cross-border Trade) (Miscellaneous Amendments) Regulations 2024 implement this measure. Most ‘qualifying Northern Ireland goods’ (essentially goods in free circulation) moving from Northern Ireland to Great Britain through Irish ports will not be subject to import customs processes. Also from 31 January 2024, health certification will be introduced for imports from the EU of medium-risk animal products, plants, and plant products, and high-risk food and feed of non-animal origin. (Contact: Sam Kiely)

This week’s CJEU VAT calendar

On 18 January, the CJEU will deliver a judgment in Hauptzollamt Braunschweig, on import VAT on smuggled cigarettes.