No entitlement

VAT exemption for welfare services and profit-making bodies

LIFE was a profit-making private organisation providing daycare services for adults with disabilities. The issue was whether its supplies were exempt supplies of welfare services within VATA 1994 Sch 9 group 7 item 9 as contended by the taxpayer or standard rated as HMRC claimed.

The First-tier Tribunal decided that LIFE’s supplies did not fall within item 9. However it concluded that they should be treated as exempt on the ground that item 9 was incompatible with Art 132(1)(g) of the Principal VAT Directive because supplies made by charities were exempt but not those made by entities such as LIFE. HMRC appealed.

The Upper Tribunal said the First-tier Tribunal had erred when finding that UK domestic law was incompatible with EU law. The legislation did not assume that all charities would benefit from the exemption only...