Charitable services

Did a charity’s activities amount to economic activity for VAT purposes?

The taxpayer was a registered charity that promoted itself as a centre of excellence for the advancement of education in water outdoor and indoor activities for young people. It was not 
VAT-registered and did not charge VAT on its activities.

In 2005 it built a training centre at a cost of £135 000 as part of an upgrade of the facilities.

HMRC ruled that the construction services supplied to the taxpayer were not zero rated within VATA 1994 Sch 8 group 5 items 2 and 4 because it was carrying out business activities. The taxpayer appealed on the ground the building was to be used solely for charitable purposes.

The First-tier Tribunal and Upper Tribunal found for the taxpayer; HMRC appealed. It said the Court of Justice of the EU had clarified the test for...