CVC VAT & Charities Newsletter – August 2015

  • Case Updates
    1. Court of Justice of the European Union – AG Opinion: welfare exemption.
    2. First Tier Tribunal: input tax recovery.
  • VAT Appeal Updates 
  • Summer Budget 
  • HMRC News
    1. Revenue and Customs Brief 13/15: reduced rate of VAT for the installation of energy saving materials.
    2. VAT Notice 700/45: How to correct VAT errors and make adjustments or claims.
    3. VAT Notice 700/21: Keeping VAT records.
    4. VAT Mini One Stop Shop



Court of Justice of the European Union (CJEU)

AG Opinion – welfare exemption

The Advocate General (AG) has given an Opinion in the case of Les Jardins de Jouvence [C-335/14].

The Gardens of Youth SCRL is a Belgian profit making commercially run company which manages care institutions and provides health care and aid. It does not receive state funding. The company provided assisted living facilities (studio apartments) and operated onsite restaurants, cafes, snack bars, hairdressers and beauty treatments.  The onsite restaurant and beauty services were offered on a fee paying basis both to tenants and non-tenants.

The company recovered VAT incurred on the construction of the studios, restaurants, beauty salon etc. on the basis it made taxable supplies.

The Belgian Tax Authority considered the company’s supplies of assisted living accommodation to be exempt from VAT.  The company was held liable to repay VAT it had recovered. The company appealed this decision.

The question before the AG was whether the company’s supplies of assisted living accommodation and ancillary services (catering, beauty etc.) fall within the VAT exemption for welfare services. The VAT exemption for welfare services applies to supplies made by bodies governed by public law or by other organisations recognised as charitable by the Member State concerned.

The AG is of the view that the company’s supplies of assisted living accommodation can fall within the VAT exemption for supplies of welfare services. In addition, the ancillary supplies (catering, beauty services etc.) made to tenants also fall within the VAT welfare exemption. However, the supplies to non-tenants of catering, beauty services etc. are not ancillary and do not fall within the VAT exemption.

Essentially, this opinion indicates that VAT exemption for welfare services is capable of applying to for-profit suppliers. The AG’s Opinion is not final and the CJEU may not choose to follow this; however, in most cases the AG’s Opinion is the outcome delivered by the CJEU.

First Tier Tribunal

Input tax recovery

Whiteabbey Masonic Club (“the Club”) appealed against an assessment by HMRC representing VAT reclaimed as input tax by the appellant on the purchase of a kitchen.

The Club operates from premises owned by the Whiteabbey Masonic Trustee Board on Trust.  The Trustee Board granted a free 25 year lease to Brookville Masonic Hall Company (BM), which was responsible for the upkeep of the premises in return. BM is not VAT registered. BM had an informal agreement with the Club that the Club managed the premises on behalf of BM.  The Club was responsible for providing social and recreational facilities for the Masonic Lodges but also gained an income from private individuals. It provided function facilities including a bar.

The Club installed a new kitchen to provide catering facilities. Although the Club paid for the kitchen, the monies had been provided by BM. After taking account of the risks involved in employing fulltime catering staff, the Club decided to engage an outside caterer. The outside caterer contracted directly with customers.

The Club contended there was sufficient linkage between the VAT incurred on the new kitchen and its taxable bar sales. The addition of catering facilities, allowed the Club to receive an economic benefit from increased third party room hire, together with bar sales. Without the kitchen, sales would be substantially diminished.

HMRC claimed that there was no discernible evidence that the new kitchen had increased bar sales. In any event, HMRC contended that “benefit” was not the test. The relevant question was whether the link was direct and immediate.

The Tribunal held that the cost of the kitchen was a direct and immediate link to the Club’s service of maintaining the premises for BM. That service is not a taxable supply for VAT purposes and so the VAT incurred was irrecoverable. The appeal was dismissed.

This case acts as a reminder that VAT registered charities must ensure that VAT incurred is attributed carefully. HMRC consider that VAT incurred on supplies received is recoverable to the extent that this VAT is a cost component of taxable transactions (standard, reduced or zero-rated) made, and there is a connection between the supply received by a charity and the supply it makes.



Longridge on the Thames [2014] UKUT 0504 (TCC) FTC/52/2013

The Upper Tribunal found for Longridge. HMRC has been granted permission to appeal to the Court of Appeal.

The Upper Tribunal upheld the First Tier Tribunal’s decision that construction services supplied to Longridge should be zero-rated because the construction services related to supplies for a building that was intended for use solely for relevant charitable purposes (RCP). Longridge is a registered charity. The VAT in dispute was incurred on the construction of a training centre. The First Tier Tribunal found that the cost of construction was met entirely by donations and grants rather than charges made to customers (although charges were made to persons attending courses these were heavily subsidised and reliant on volunteers). The zero-rate of VAT applies to construction services if the services relate to a building used solely for a charitable purpose, otherwise than in the course or furtherance business.


Brockenhurst College [2014] UKUT 0046 (TCC) FTC/36/2013

HMRC are appealing the decision of the Upper Tribunal. The Court of Appeal hearing is scheduled for 4/5 November 2015.

The Upper Tribunal upheld the First Tier Tribunal decision, holding that it was right to conclude that the restaurant and entertainment services provided by students of the College are VAT exempt as supplies of services and goods closely related to the provision of education.

The Upper Tribunal agreed that there is no requirement under EU law that the goods or services must be consumed by the student. Supplies may be closely related if they are a means whereby the students better enjoy the supply of education; the requirement for direct use denotes no more than a need for the goods or services to be for the direct benefit of the student.


British Film Institute [2014] UKUT 0370 (TCC) FTC/44/2013

HMRC has appealed to the Court of Appeal and made an order that the matter be referred to the CJEU.

The appeal concerns whether Article 13A(1)(n) of the Sixth Directive (EU law) had direct effect in the UK between 1 January 1990 and 31 May 1996. Article 13A(1)(n) exempted supplies of “certain cultural services and goods closely linked thereto by bodies governed by public law or other cultural bodies recognised by the Member State concerned”. During the claim period the UK law did not provide exemption for cultural services and BFI accounted for VAT at the standard rate on the sale of tickets for admission to the screenings of films.


Wakefield College [2013] UKFTT 731 (TC) TC03108

HMRC have appealed the decision of the First Tier Tribunal. The Upper Tribunal hearing was listed for 27 – 28 July 2015. Awaiting publication of the decision.

The First Tier Tribunal decided that course fees which were part funded by grants and part paid by the student amounted to non-business income (it was accepted that fees fully paid for by the student was business income).



The Chancellor of the Exchequer delivered his Budget to Parliament on Wednesday 8 July 2015. The Chancellor promised that there would be no change to VAT rates throughout the duration of the current Parliament.

In addition, the government will legislate in Finance Bill 2016 to refund to eligible public bodies VAT incurred on specified shared services.



Revenue and Customs Brief 13/15

The European Court recently ruled that the UK applied the reduced rate of VAT for the installation of energy saving materials too widely. This brief sets out HMRC’s plans in respect of this decision.

Any legislative changes will not be implemented until Finance Act 2016. Until then the installation of energy saving materials will continue to be reduced rated and any changes will not apply to supplies already made.

VAT Notice 700/45: How to correct VAT errors and make adjustments or claims

HMRC has updated VAT Notice 700/45 ‘How to correct VAT errors and make adjustments or claims’. HMRC’s VAT Error Correction Team address has changed. VAT error notifications should be sent to the new address.

VAT Notice 700/21: Keeping VAT records

This Notice has been updated to guide taxpayers registered to use the VAT Mini One Stop Shop (MOSS).VAT Notice 700/21.

VAT Mini One Stop Shop (MOSS)

HMRC has updated its guidance regarding registering and using VAT MOSS, this guidance can be found here. In particular this update includes information on correcting VAT MOSS returns.


Constable VAT Consultancy LLP (CVC) is a specialist independent VAT practice with offices in London and East Anglia. We work together with many charities and not-for-profit bodies ranging from national charities to regionally based organisations. CVC has a nationwide client base.

We understand that charities wish to achieve their objectives whilst satisfying the legal requirements placed upon them. Charities may be liable to account for VAT on supplies made and VAT will be payable on certain expenditure. As irrecoverable VAT represents an absolute cost to most charities, regardless of their VAT registration status, there is a need to review the position regularly and carefully. We offer advice with planning initiatives, technical compliance issues, complex transactions, help with innovative ideas on VAT saving opportunities, and liaising with HMRC.

If you would like to discuss how VAT impacts on your organisation please contact Stewart Henry,  Laura Beckett or Sophie Cox on 020 7830 9669, 01206 321029 or via email on, and  Alternatively, please visit our website at where you can view some of the services we offer in more detail and subscribe to our free general and regular VAT alerts and updates. Visit our website for current news updates. You can also follow CVC on Twitter.

This newsletter is intended as a general guide to current VAT issues and is not intended to be a comprehensive statement of the law. No liability is accepted for the opinions it contains or for any errors or omissions. CVC cannot accept responsibility for loss incurred by any person, company or entity as a result of acting, or failing to act, on any material in this newsletter. Specialist VAT advice should always be sought in relation to your particular circumstance.