Zero-rated building certificate for new boathouse

The taxpayer a club registered as a charity constructed a boathouse. It believed that because the building was used solely for its charitable purposes it qualified for zero rating so it issued a zero-rating certificate to the builder.

HMRC disagreed. This was on the basis that the club collected subscription fees from its members and also made a small charge for each rowing session – the total income in the annual accounts was about £8 000. It said the club was wrong to issue the certificate and imposed a penalty.

The taxpayer appealed. It said it was not carrying on a business despite collecting subscriptions and charging for rowing sessions. However even if the business argument failed the taxpayer claimed that the club had a ‘reasonable excuse’ for issuing the certificate and the penalty should be overturned. A senior officer of the club’s...