A court has ruled that a farming charity was not liable to pay hundreds of thousands in VAT on admission fees for its annual event after a challenge by HMRC.
Last week, the Upper Tribunal dismissed HMRC’s appeal against the Yorkshire Agricultural Society (YAS) over its tax liability for the 2016 annual Great Yorkshire Show.
The charity had previously paid standard-rate VAT on its admission income for the four-day event.
But in April 2020, it made a voluntary disclosure to HMRC of overdeclared output tax and overclaimed input tax, arguing that it should have been exempted as the show is a charity fundraising event.
YAS subsequently submitted a net VAT repayment claim of £201,949 for its 2016 show before declaring that it had also treated the 2017 show as exempt from VAT.
In May 2021, HMRC refused the claim and later assessed that YAS owed £90,776 for the VAT period ending December 2017 relating to admission fees, sponsorship income, and advertising.
YAS appealed to the first-tier tribunal (FTT) against HMRC’s refusal of the claim and assessment, and the court ruled in favour of the charity in 2023.
HMRC’s appeal against the FTT’s decision, which was heard by the Upper Tribunal last October, was dismissed on 9 January.
Upper Tribunal’s decision
In its submission to the Upper Tribunal, HMRC argued that the charity should be liable for VAT because the “primary purpose” of the show was not solely to raise funds.
However, the Upper Tribunal agreed with the FTT that “the two main purposes of the show were fundraising and education, which were of equal importance and were inter-dependent”, meaning the charity was not liable to pay VAT.
The Upper Tribunal also agreed with the FTT on the EU Principal VAT Directive, which allows member states to exempt from VAT “supply of services and goods in connection with fundraising events exclusively for their own benefit in the public interest”, provided that it is unlikely to distort competition.
It concluded: “HMRC’s appeal against the FTT’s decision to allow the 2016 repayment claim by the society is dismissed.”
YAS: ‘The financial implications are significant for us’
A YAS spokesperson told Civil Society it was “delighted” by the decision.
“We hope this recent decision marks a conclusion for the society after a long legal journey,” they said.
“The financial implications are significant for the society, and this decision comes as a welcome boost to us and our continuous year-round work to support the farming community and promote agriculture.”
They said the profits raised through the charity’s activities at the Great Yorkshire Showground in Harrogate, which includes the Great Yorkshire Show, “fund our mission as a registered charity to deliver meaningful support to those working in farming”.
“This entails providing opportunities for professional development and wellbeing support to farmers, awarding grants, bursaries and scholarships, and organising events and competitions to enhance young people’s understanding of farming, food and the countryside.”
HMRC told Civil Society that it is “carefully considering” the latest judgment.
More cases ‘likely to follow’
In a briefing this week, audit firm RSM said the case “represents another milestone” following the UK’s exit from the EU and urged charities to take note.
“More cases on similar points of interpretation are likely to follow as significant doubt still abounds on the proper interpretation of UK VAT law during its transition from the EU,” the briefing reads.
“Now is the time for charities to consider their position to see whether they could also benefit from this decision where exemption was ruled out in the past.”
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