Weekly VAT News

Yorkshire Agricultural Society: fund-raising events – UT

The Yorkshire Agricultural Society (the Society) is a charity that organises and runs the annual Great Yorkshire Show. For the VAT exemption for charitable fund-raising events to apply, the show’s primary purpose must be to raise money. In considering the VAT treatment of admissions to the 2016 show, the Upper Tribunal has upheld the First-tier Tribunal’s decision that the VAT exemption applied. The UT disagreed with the FTT’s finding that the fund raising only had to be “a” primary (i.e., important) purpose, rather than “the” primary purpose. However, the UT agreed with the FTT that the fund raising was not a discrete purpose, but was one of two equally important and inter-dependent purposes, the other being education, which formed a single, main purpose of the show, satisfying the requirement for the VAT exemption. The UT also agreed with the FTT that the other UK legislative condition (that the show should be “promoted as being primarily for the raising of money”) was not necessary to the requirement in the EU Principal VAT Directive that the fund-raising exemption should not distort competition, and that the condition was accordingly ultra vires. Consequently, applying a conforming interpretation (the Marleasing principle) to that UK legislative condition, the UT concluded that the preferable interpretation was that the word “primarily” should be deleted (as opposed to the deletion of the whole sub-clause). HMRC’s appeal against the FTT’s decision was accordingly dismissed. (In light of the analysis around conforming construction, both parties agreed that the applicable law was the EU law in place at the end of the Brexit Implementation Period, 31 December 2020, as the supplies in question were made in 2016 and the Society’s claim for the repayment of overpaid VAT was made in 2020.) (Contact: Andrew Clarke)

HMRC ‘one-to-many’ campaign – charities and business/non-business apportionment

The Chartered Institute of Taxation (CIOT) has reported that HMRC are undertaking a one-to-many campaign aimed at raising awareness “in the small VAT registered charities sector on the obligation to complete business/non-business apportionment calculations”. HMRC are sending educational emails to selected small VAT registered charities (with up to £2m turnover). HMRC consider that many smaller charities are not aware of their non-business activities and the requirement to apportion VAT incurred. The email refers to the possibility that VAT may have been over-claimed with respect to non-business activities, and includes links to HMRC guidance. (Contact: Nick Comer)

EU: VAT after ViDA

At its meeting on 13 December 2024, the EU’s VAT Expert Group (VEG) presented its report on VAT after ViDA: Reflections on the future of VAT. The report was prepared by the VEG at the request of the European Commission. The report notes the importance of the EU Single Market for the growth and competitiveness of the EU, and that the Single Market requires an efficient EU VAT system to allow businesses to operate smoothly across borders. The report examines strategies for modernising the EU VAT system. It considers the long-term future of the VAT system, with a focus on “simplifying compliance, fostering neutrality across the EU, and safeguarding VAT revenues by enhancing administrative efficiency”. The report identifies the following foundations on which the future VAT system should be based: neutrality; broadening the tax base; aligning the VAT rules for goods and services; improving the VAT collection mechanism and VAT refund process; and ensuring the VAT system fits into the EU context, including the legislative and decision-making processes, and the creation of an EU VAT agency. It makes a number of recommendations to improve the current VAT system, which would also be steps in the transition to the future of VAT. The report recognises that the immediate focus is the implementation of the VAT in the Digital Age (ViDA) package, and includes some recommendations, but the VEG presents the report as a wider strategic roadmap for a future VAT framework. (Contact: Donna Huggard) 

Dbriefs webcast

On 16 January at 12.00, the UK Tax Update – January webcast will be hosted by Andrew Clarke. Our panel will discuss the latest UK tax developments, with updates on news in corporate, employment and indirect tax.