England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
ON APPEAL FROM THE VAT AND DUTIES TRIBUNAL

		Royal Courts of Justice Strand, London, WC2A 2LL
		6 March 2009

MR. JUSTICE LEWISON:

Introduction

1. The constitution of The British Association for Shooting and Conservation Limited ("BASC") says that its objects are to:

"(a) Act as a representative national body for all sporting shooting.

(b) Promote and safeguard sporting shooting.

(c) Aim at the responsible unification, guidance, education and representation of all engaged in such sport together with the promotion of conservation and scientific research into all aspects of the quarry species and other matters connected with such sport in accordance with the ethics of good sportsmanship.

(d) Uphold and maintain the legitimate interest of its members in such a manner as this Association … shall decide, in particular with regard to:-

(i) proposals to restrict by legislation the use of sporting firearms

(ii) the lawful right of every member to shoot at sporting quarry …"

2. These aims are supplemented by a mission statement (published on its website) which describes its mission as follows:

"Our mission is to promote and protect sporting shooting and the well-being of the countryside throughout the United Kingdom and overseas. We represent our members' interests by providing a voice for sporting shooting which includes wildfowling, game, and rough shooting, deer stalking, target shooting and air gunning, pigeon shooting and pest control, gun dogs, promoting practical habitat conservation, training and the setting of standards and undertaking appropriate research."

3. BASC has about 130,000 members who pay an annual subscription. Its subscription income in 2007 was about £5.6 million. In return for their subscriptions, members receive (among other things) a magazine and insurance cover. It is common ground that part of the subscription is attributable to the zero-rated supply of magazines, and another part to the exempt supply of making insurance arrangements. The issue on this appeal is the correct VAT treatment of the rest. The VAT & Duties Tribunal (Mr Colin Bishopp, Chairman) decided that the residual subscription income was the consideration for a standard-rated supply and was therefore VATable. BASC now appeal. The appeal is restricted to a question of law only.

Findings of fact

4. Before embarking on the law, I set out the Tribunal's salient findings of primary fact:

i) From the individual member's perspective, the principal benefits of membership are the periodicals, the insurance cover arranged by BASC, its members' advisory service and its representation of the sport (§ 14).

ii) BASC's primary purpose is to act as a representative body for those engaged in sporting shooting (§ 15).

iii) The primary purpose is qualified by other objectives. These include conservation which important both for the members and for its own sake (§ 16).

iv) Conservation, coupled with land management, is one of BASC's major activities. Much of what it does in this sphere is not exclusively for the immediate benefit of its own members but for the advantage of all (though including its own members) who take an interest in the preservation of the countryside, irrespective of their wish to pursue game, and is correspondingly of public benefit (§ 17).

v) BASC performs an important public education role (§ 18).

vi) BASC represents the UK government in European negotiations. This is an important activity and, although it undoubtedly does benefit its members, it also confers benefits on the community at large (§ 19).

vii) BASC's director of communications spends a great deal of his time on activities which are of wider public benefit, including advising central and local government, public bodies such as ACPO and conservation authorities, and political parties (§ 20).

viii) There is a direct link between the residual subscription income and those activities (§ 23).

5. The Tribunal's factual conclusion, based on those primary findings of fact, was expressed (§ 21) as follows:

"From that evidence I am satisfied that, while BASC is an organisation whose primary purpose is the protection and advancement of its members' interests, and that it cannot divorce any of what it does from that primary purpose, it conducts itself in a thoroughly responsible and public-spirited fashion, has rightly earned the respect of government and similar bodies, and does not seek to advance its members' interests at all costs but only when they coincide with, or at least do not conflict with, the public interest. I am, in particular, satisfied that BASC is rather different from a conventional campaigning organisation or pressure group."

6. Later in the decision the Tribunal made the following factual comments or findings:

i) Conservation and other public-spirited activities are seriously pursued and represent a substantial part of BASC's activities (§ 36);

ii) BASC's activities make it more likely that the right to shoot is preserved and the facilities for doing so survive; and those activities are important (§ 41).

One supply or more than one supply?

7. There is one preliminary matter that must be addressed. In paragraph 2 of its decision the Tribunal said:

"It seemed to me probable that the residual subscription income is the payment for a bundle of supplies, but neither party suggested that they should be identified, segregated and treated separately, and I shall treat the bundle as a single supply, whether or not composite."

8. It is not entirely clear from this quotation whether the Tribunal explicitly raised this question with the parties, or whether it was merely recording its private thoughts. However, it was common ground that the Tribunal was correct in recording that it had not been asked further to dissect the benefits of a subscription, having excluded from its consideration the supply of the magazine and insurance. Mr Cordara QC on behalf of BASC sought to argue that the residual subscription income could be dissected into a number of separate supplies. Mr Chapman, for HMRC, objected that this was not open to BASC on an appeal on a point of law, in view of the way that BASC had put its case below. If the residual subscription income was to be further dissected, it would require a detailed factual examination of precisely how much time and money BASC spent on the activities alleged to constitute separate supplies. Mr Chapman relied on the principle encapsulated in the judgment of May LJ in Jones v. MBNA International Bank (CA) (30th June 2000) which was applied by the Court of Appeal in McDonald v. Coys of Kensington [2004] EWCA Civ 47 and Petromec Inc v Petroleo Brasileiro SA Petrobas [2006] 1 Lloyd's Rep 121. His formulation of the principle was as follows:

"..... a party cannot ..... normally seek to appeal a trial judge's decision on the basis that a claim, which could have been brought before the trial judge, but was not, would have succeeded if it had been brought. The justice of this as [a] general principle is ..... obvious. Parties to litigation are entitled to know where they stand. The parties are entitled, and the court requires, to know what the issues are. Upon this depends a variety of decisions, including, by the parties, what evidence to call, how much effort and money it is appropriate to invest in the case, and generally how to conduct the case; and, by the court, what case management and administrative decisions to make and give, and the substantive decision of the case itself. Litigation should be resolved once and for all, and it is not, generally speaking, just if a party who successfully contested a case advanced on one basis should be expected to face on appeal, not a challenge to the original decision, but a new case advanced on a different basis. There may be exceptional cases in which the court would not apply the general principle which I have expressed."

9. It is true that one difference between a tax appeal and other litigation is that a decision in a tax appeal relates only to a particular disputed assessment, and does not create an issue estoppel for assessments in future years. But I do not consider that this turns every tax appeal into an exceptional case. In my judgment Mr Chapman's point is well-taken. I do not consider that on appeal BASC can open the question whether the residual subscription income should be further dissected. That is something that BASC can raise if and when it faces a disputed assessment in the future.

The legislation

10. The domestic provisions governing the exemptions in issue are contained in Groups 9 and 10 of Schedule 9 to the VAT Act 1994. These provisions are designed to give effect to the directly applicable provisions of article 13A of the EC Council Directive 77/388 ("the Sixth Directive") (now article 132(1)(l) and (m) of the Council Directive of 28 November 2006) on the common system of value added tax. Argument on this appeal concentrated on the words of the directive itself rather than its domestic implementation. The relevant provisions of the Sixth Directive are:

"(l) supply of services and goods closely linked thereto for the benefit of their members in return for a subscription fixed in accordance with their rules by non-profit-making organisations with aims of a political, trade-union, religious, patriotic, philosophical, philanthropic or civic nature, provided that this exemption is not likely to cause distortion of competition;

(m) certain services closely linked to sport or physical education supplied by non-profit-making organisations to persons taking part in sport or physical education;…

(2)(b) The supply of services or goods shall not be granted exemption as provided for in (1)(b), (g), (h), (i), (l), (m) and (n) above if:

- it is not essential to the transactions exempted,

- its basic purpose is to obtain additional income for the organisation by carrying out transactions which are in direct competition with those of commercial enterprises liable for value added tax."

11. There are minor changes in wording between this text and the text of the 2006 Directive, but neither Mr Cordara QC nor Mr Chapman suggested that the changes made any substantive difference.
12. The general principle is that VAT is payable on all goods or services supplied for consideration by a taxable person within the relevant territory. Paragraphs (l) and (m) are exceptions to this general principle. In considering the scope of an exception to a general principle of community law, the court should adopt a strict, but not strained, construction. A "strict" construction is not to be equated, in this context, with a restricted construction. The court must recognise that it is for a supplier, whose supplies would otherwise be taxable, to establish that it comes within the exemption, so that if the court is left in doubt whether a fair interpretation of the words of the exemption covers the supplies in question, the claim to the exemption must be rejected. But the court is not required to reject a claim which does come within a fair interpretation of the words of the exemption because there is another, more restricted, meaning of the words which would exclude the supplies in question: Stichting Uitvoering Financiële Acties v Staatssecretaris van Financiën (Case 348/87) [1989] ECR 1737; Expert Witness Institute v Customs and Excise Commissioners [2002] STC 42.
13. Both Mr Cordara and Mr Chapman took the two exceptions in reverse order; and so will I. I begin, then, with the exception relating to sport.

Sport

14. In order to come within this exception the taxable person must show:

i) That it is a non-profit-making organisation;

ii) That it makes supplies of services;

iii) That the services are supplied to persons taking part in sport;

iv) That the services are closely linked to sport; and

v) That the supply is essential to the transactions exempted.

15. It is not disputed that the first two conditions are satisfied in this case.
16. The third of the conditions was considered by the ECJ in Canterbury Hockey Club v Revenue and Customs Commissioners [2008] STC 3351, a decision which post-dated the Tribunal's decision in the present case. In the Canterbury case the hockey clubs were members-only sports clubs. Members paid an annual subscription in consideration for their membership rights. The hockey clubs were unincorporated associations without legal personality. They were themselves members of England Hockey, a non-profit-making organisation for the encouragement and development of the playing of hockey in England. England Hockey charged affiliation fees in consideration for the services it supplied to the hockey clubs. What was in issue was the affiliation fee that the clubs paid to England Hockey. The ECJ noted (§ 13):

"According to the referring court, the services supplied by England Hockey do not directly provide the Hockey Clubs' members with the means of playing hockey. It noted that it was not in issue between the parties to the main proceedings that the services supplied by England Hockey are closely linked to sport." (Emphasis added)

17. The ECJ decided that it was not necessary for a supply of services to be made directly to persons participating in sport. They said (§ 29):

"Thus, if the words 'services … supplied … to persons taking part in sport' in art 13A(1)(m) of the Sixth Directive were interpreted as meaning that they require that the services in question be directly supplied to natural persons taking part in sport within an organisational structure put in place by a sports club, the exemption provided for by that provision would depend on the existence of a legal relationship between the service supplier and the persons taking part in sport within such a structure. Such an interpretation would mean that a large number of supplies of services essential to sport would be automatically and inevitably excluded from the benefit of that exemption, irrespective of the question whether those services were directly linked to persons taking part in sport and who was the true beneficiary of those services. Such a result would, as the Commission correctly maintains, run counter to the purpose of the exemption provided for by that provision which is to extend the benefit of that exemption to services supplied to individuals taking part in sport."

18. It is thus clear from the decision of the ECJ that the services in question need not be supplied directly to persons participating in sport. If and in so far as the point was conceded or common ground, the ECJ plainly thought that the concession was correct. The question under this head, in a case in which the services are not directly supplied to persons participating in sport, is: who are the true beneficiaries of the services in question? If the true beneficiaries of the services in question are persons participating in sport, then this condition will have been satisfied.
19. The other point of relevance to emerge from the Canterbury case is the ECJ's observation (§ 27) that:

"Article 13A(1)(m) of the Sixth Directive is not intended to confer the benefit of the exemption under that provision only on certain types of sport but covers sport in general…"

20. The fourth of the conditions requires a close linkage. The ECJ has repeatedly pointed out that the expressions "closely related to " and "closely linked" are not defined by the Directive; and have essayed no general definition of that expression themselves. However the ECJ has considered these expressions in the context of different exceptions from the ones with which I am concerned. In Commission v France (Case C-76/99) the French tax code exempted the analysis of medico-biological samples from VAT. The issue was whether the cost of transporting those samples between laboratories was also subject to VAT as activities "closely related" to hospital and medical care. The ECJ noted that the Directive did not define the concept of closely related activities (§ 22) and continued (§ 23):

"that concept does not, however, call for an especially narrow interpretation since the exemption of activities closely related to hospital and medical care is designed to ensure that the benefits flowing from such care are not hindered by the increased costs of providing it that would follow if it, or closely related activities, were subject to VAT."

21. The court also pointed out (§ 27) that:

"a service must be regarded as ancillary to a principal service if it does not constitute for customers an aim in itself, but a means of better enjoying the principal service supplied."

22. The court concluded that the transmission of the sample was ancillary to the analysis of the sample, and consequently was not subject to VAT. The close relation consisted in the ancillary character of the service.
23. In Commission v Germany (Case C-287/00) the German tax code exempted from VAT research activities carried out by public sector higher educational establishments. It is important to realise that the exemption related to research carried out for consideration (i.e. under contracts with outside and commercial organisations). Thus the ECJ was not concerned with research in general. The issue was whether research of this kind was "closely related" to university education. Following its previous decision in Commission v France the ECJ said (§ 47):

"Nevertheless, that concept does not require an especially strict interpretation since the exemption of the supply of services closely related to university education is designed to ensure that access to the benefits of such education is not hindered by the increased costs of providing it that would follow if it, or the supply of services and of goods closely related to it, were subject to VAT (see, by analogy, in relation to Article 13(A)(1)(b) of the Sixth Directive, Case C-76/99 Commission v France [2001] ECR I-249, paragraph 23). However, if the undertaking by State universities of research projects for consideration is made subject to VAT, that does not have the effect of increasing the cost of university education."

24. The last of the cases to which I was referred in which the ECJ has considered this condition was Diagnostiko & Therapeftiko Kentro Athinon-Ygeia AE v Ipourgos Ikonomikon (Case C-394/04 and C-395/04). This case concerned the provision of televisions and telephones to hospital in-patients; and the provision of a bed and food to their accompanying relatives. Ygeia argued that the provision of these services aided a patient's psychological well-being and thus contributed to a faster recovery; and that on that basis the services were closely related to medical care. The ECJ disagreed. The court said:

"18      Accordingly, services fall within the concept of an 'activity closely related' to hospital or medical care appearing in Article 13A(1)(b) of that directive only when they are actually supplied as a service ancillary to the hospital or medical care received by the patients in question and constituting the principal service (Dornier, paragraph 35).

19      It is apparent from the case-law that a service can be considered to be ancillary to a principal service where it constitutes not an end in itself but a means of enhancing the enjoyment or benefit of the principal service supplied by the provider (see, to this effect, in particular, Joined Cases C-308/96 and C-94/97 Madgett and Baldwin [1998] ECR I-6229, paragraph 24, and Dornier, paragraph 34)." (Emphasis added)

25. The court concluded (§ 25):

"Accordingly, taking account of the objective pursued by the exemption provided for in Article 13A (1)(b) of the Sixth Directive, it follows that only the supply of services which are logically part of the provision of hospital and medical-care services, and which constitute an indispensable stage in the process of the supply of those services to achieve their therapeutic objectives, is capable of amounting to 'closely related activities' within the meaning of that provision. Only such services are of a nature to influence the cost of health care which is made accessible to individuals by the exemption in question."

26. From these cases I conclude that:

i) The policy underlying the inclusion of "closely related" services within the sports exception is to ensure that participation in sport is not hindered by the increased cost of participation that would result if the services in question were taxable;

ii) The exception is intended to apply to sport generally, rather than to limited categories of sport;

iii) Services are closely related to participation in sport only if they are ancillary to that participation;

iv) Services will be regarded as ancillary to a principal service if they constitute not an end in themselves but a means of enhancing the enjoyment or benefit of the principal service.

27. The fourth condition is that the supply must be essential to the transactions exempted. The phrase "the transactions exempted" which appears in the Directive itself is a curious one since, normally at least, a transaction is itself a supply. However, in the Canterbury case the ECJ said (§ 22):

"Moreover, it follows from the first indent of Article 13 A (2)(b) of the Sixth Directive that supplies of services covered by Article 13A(1)(m) may be exempted only if they are essential to the transaction exempted, namely sport or physical recreation."

28. Thus the sport itself is treated as the "transaction" exempted. The question, then, under this head is whether the services are essential to the sport. Fulfilment of this condition to some extent shades into fulfilment of the third condition as the cited passage from paragraph 25 of the Ygeia case shows. Nevertheless the ECJ does discuss this condition separately in the cases. In the Canterbury case itself, as the cited extract shows, it was treated separately.
29. In Commission v Germany the court said (§ 48):

"In addition, contrary to the German Government's arguments, although the undertaking of such projects may be regarded as of great assistance to university education, it is not essential to attain its objective, that is, in particular, the teaching of students to enable them to pursue a professional activity. Indeed, many universities achieve this aim without carrying out research projects for consideration and there are other ways to ensure a link between university education and professional life."

30. Thus "great assistance" falls short of "essential". In the Diagnostiko & Therapeftiko Kentro Athinon-Ygeia case the court said (§ 29):

"It follows that the provision of services which, like those at issue in the main proceedings, are of such a nature as to improve the comfort and well-being of in-patients, do not, as a general rule, qualify for the exemption provided for in Article 13A(1)(b) of the Sixth Directive. It can be otherwise only if those services are essential to achieve the therapeutic objectives pursued by the hospital services and medical care in connection with which they have been supplied."

31. Thus improvements in comfort and well-being also fall short of being essential, at least as a general rule.
32. In Staatssecretaris van Financiën v Stichting Kinderopvang Enschede (Case C-415/04) the taxable person was an organisation which itself provided care for preschool children, and for school-age children outside school time, but which also put parents in touch with independent day carers who provided the same service. In the latter case, it charged parents an hourly rate in addition to that which they paid to the carers, although it did not intervene further as between parents and carers, or accept any liability with regard to the service provided by the latter. The issue was whether the hourly rate was liable to VAT. In the course of his opinion Jacobs A-G said:

"54.      It seems difficult to suppose that a parent can use childcare services without first being put in touch with the carer. The Foundation stresses that the childcare services in question are accessed only through its activities as intermediary. The Netherlands Government however argues that other channels are also available, including advertisements or commercial agencies.

55.      It seems to me that if the Foundation were to do no more than keep a list of all people known to offer childcare and to make that list available to parents, the service could in no way be described as essential. There are many other ways in which parents can enter into contact with would-be carers.

56.      However, if the Foundation's screening and training activities are such that its services as intermediary provide access to only such competent and trustworthy carers as parents would otherwise have been unable to identify, then the latter services may be viewed as essential in order to gain access to childcare of that quality, even if the Foundation does not accept responsibility for any shortcomings in the childcare actually provided."

33. These paragraphs of his opinion were specifically approved by the court itself which said:

"26      While the Foundation maintains in this regard that parents can only have access to the childcare service provided by host parents by using the Foundation's intermediary services, the Netherlands Government and the Commission contend that other channels are available for putting parents seeking childcare in touch with host parents, such as advertisements or commercial agencies.

27      As the Advocate General has correctly noted at points 55 to 57 of his Opinion, the mere fact of keeping a list of all people known to offer childcare and making that list available to parents cannot be described as an essential service. Conversely, if the Foundation's screening of host parents' past records, and the fact of providing them with training, result in the selection only of host parents who are competent, trustworthy and such as to provide a higher quality of childcare than parents could otherwise have obtained without using the Foundation's services, these services could then be regarded as essential to the provision of quality childcare.

28      It is for the national court to determine whether, in the light of the facts of the case before it, the childcare service used by parents on the basis of the Foundation's services as intermediary between parents and host parents is of such a nature or quality that it would be impossible to obtain a service of the same value without the assistance of an intermediary service such as that offered by the Foundation. "

34. From these cases I conclude that:

i) The fact that a service is of great assistance to an exempted transaction is insufficient to make that service essential to that transaction;

ii) The fact that there are alternative means of entering into an exempted transaction is relevant in determining whether the services in question are essential to that transaction;

iii) But in considering that question the decision-maker must ask not merely whether, without the service in question, it would be impossible to enter into an exempted transaction, but whether it would be impossible to enter into an exempted transaction of the same value;

iv) In the case of sport the exempted transaction is the sport itself.

35. In the decision in the present case the Tribunal dealt with the sport exception as follows (§ 41):

"I accept Mr Barlow's point, in relation to his second argument, that a supply is not disqualified from falling into Item 3 of Group 10 merely because it is not made while the recipient is actually partaking in the relevant sport. However, I am bound to agree with Mr Chapman that BASC's supplies to its members—not only the primary supply of representation but also the subsidiary supplies of conservation, research and the like—do not have the close link with participation in sport which the legislation demands (leaving aside the UK's additional requirement that the supply be "essential"). BASC's activities are no doubt of benefit to participants in the sport, but that is not, in my view, enough. I differ from Mr Chapman in that it seems to me irrelevant that not all sporting shooters are members of BASC (they could be members of similar organisations) or of no organisation at all (since they could secure equivalent supplies themselves). However, the use in the Directive of the phrase "to persons taking part in sport" seems to me to connote a supply which, even if not essential or contemporaneous, has a direct link with actual participation. None of BASC's supplies is in that category: it does not provide to its members the land on which they may shoot, the game they may shoot at or the guns with which they may shoot it. All it can be said to do is make it more likely that the right to shoot is preserved and the facilities for doing so survive. Important though those activities may be, I do not find that they have the close link with participation which is required. Thus the supplies do not come within Item 3 to Group 10."

36. The first point (that a supply is not disqualified merely because it is not made while the recipient is actually partaking in the relevant sport) is plainly right, and is not criticised. The second point (that the services do not have a close connection with sport) may be said to be a conclusion rather than a finding of primary fact; so I leave it aside for the moment. However, the Tribunal seems to have treated the requirement that the supply be "essential" as some additional requirement of the UK, whereas it is clear from the case law of the ECJ itself that it is a separate and EU wide condition that must be fulfilled. This was, as it seems to me, an error of law; although it was an error that the Tribunal made in the taxable person's favour. The third point (that it is irrelevant that not all shooters are members of BASC or an equivalent organisation) is also, I think, an error of law. In Commission v Germany the fact that many universities achieved their educational objectives without resorting to commercially funded research was critical to the court's conclusion that such research was not essential. This point may not be a decisive point, but it goes too far to dismiss it as irrelevant. It would have to be considered at least in the context of deciding whether the services were essential. But it, too, is an error of law made in the taxable person's favour. The fourth point (that the supply must have a direct link with actual participation in sport) is also, in my judgment, an error of law. The decision of the ECJ in the Canterbury case (which, as I have said, was delivered after the Tribunal's decision in the present case) makes it clear that a direct link is too restrictive a test. Where services are not directly supplied to participants in sport the question is: who are the true beneficiaries of the services in question? Understandably this is not a question that the Tribunal asked itself. The examples of direct links that the Tribunal thought would qualify (provision of land, game or weapons) illustrate that in this respect the Tribunal set the bar too high. As Mr Cordara submitted, if, as the ECJ said in the Canterbury case, the exemption is intended to apply to sport in general, it can hardly be supposed that in the case of shooting it would be necessary for an association such as BASC to become a major arms dealer or to acquire interests in vast tracts of land all over the county in order to qualify for the exception. Mr Chapman riposted that if the burden was impossible on the facts, it merely demonstrated that the relevant criteria could not be met in relation to this particular sport; and that, anyway, the Tribunal's examples were just that. They were examples only and did not constitute the legal test by which the Tribunal directed itself. There is some force in the latter point; but in my judgment it is outweighed by the fact that the only articulation of the legal test that the Tribunal applied was that of a direct link. It may well be that, applying the correct legal test, the Tribunal would reach the same conclusion; but I cannot be sure, and the facts are for the Tribunal alone. The fifth point (that the services supplied by BASC make it more likely that the right to shoot is preserved and the facilities for doing so survive) seem to me to fall short of a finding that they are essential; but the Tribunal did not explicitly consider that condition.
37. In short, I have come to the conclusion that the Tribunal did make errors of law in its consideration of the scope of the sport exception and that I cannot be sure that the result would have been the same if it had applied what I conceive to be the correct legal test. It follows, therefore, that I must allow the appeal and remit the case to the Tribunal for further consideration.

Civic or political aims

38. This conclusion enables me to deal with the remaining point more briefly. In order to come within the political or civic purposes exception the taxable person must show:

i) That it is a non-profit-making organisation;

ii) That it makes supplies of services;

iii) That the services are supplied for the benefit of its members;

iv) That the services are supplied in return for a fixed subscription;

v) That the aims of the organisation are of a political, trade-union, religious, patriotic, philosophical, philanthropic or civic nature.

39. It is not in dispute that the first, second and fourth of these conditions are satisfied. The main debate was over the last of the conditions. In effect this debate boiled down to two questions:

i) How are you to ascertain the "aims" of an organisation and

ii) Are the aims of BASC "civic" or "political" in nature?

40. In Institute of the Motor Industry v Customs and Excise Commissioners [1998] STC 1219 the ECJ considered an organisation said to have aims of a trade union nature. It held:

"19. In the light of those considerations, it must be held that a non-profit-making organisation which aims to promote the interests of its members cannot, where that object is not put into practice by defending and representing the collective interests of its members vis-à-vis the relevant decision-makers, be regarded as having objects of a trade-union nature within the meaning of art 13A (1)(l) of the Sixth Directive.

20. The expression 'trade-union' in that provision means specifically an organisation whose main object is to defend the collective interests of its members—whether they are workers, employers, independent professionals or traders carrying on a particular economic activity—and to represent them vis-à-vis the appropriate third parties, including the public authorities.

21. Thus, a non-profit-making organisation whose main object is to defend and represent the collective interests of its members satisfies the criterion of exercising an activity in the public interest, which is the basis of the exemptions set out in art 13A(1)(l) of the Sixth Directive, in so far as it provides its members with a representative voice and strength in negotiations with third parties."

41. I derive two things from this extract:

i) That the professed aims of an organisation must be tested against what happens in reality (§ 19); and

ii) Where an organisation has multiple aims, then it is its "main object" that counts (§§ 20 and 21).

42. The meaning of "civic" was considered by the Court of Appeal in the Expert Witness Institute case. Chadwick LJ began by considering what the aims of the Institute were. He did so by construing its constitutional documents and held, as a matter of construction, that it had a primary object (viz. "the support of the proper administration of justice and the early resolution of disputes through fair and unbiased expert evidence") and subsidiary methods of implementing that primary object. He then noted that it had not been suggested that the activities which the institute carried out in practice involved any departure from the primary object for which it was incorporated. Chadwick LJ then went on to discuss the meaning of "civic" in this context. He rejected the submission that it meant the concerns of a particular locality and said that it was "plain that an interpretation of the phrase 'aims of a civic nature' which includes aims pertaining to citizenship nationwide accords with a normal and obvious use of language in an appropriate context" (§ 27). He concluded that the support of the administration of justice was an aim of a civic nature. Longmore LJ agreed. He said (§ 37):

"There can hardly be a more obvious civic object in peacetime than the support of the proper administration of justice. Of course, the tribunal of fact will wish to be careful that bodies putting themselves forward for exemption under this head of the regulations do, in fact, have the objective which they say they have. But no suggestion is made in this case that the institute does not. It would be different if the institute's objectives were solely or even, perhaps, mainly for the benefit of its members. In that case the objects would not be of a civic nature and the body would have to seek exemption, if at all, as a trade union or professional association."

43. I derive from this case that:

i) The aims of an organisation are (at least prima facie) to be found in its constitutional documents, tested against the reality of what it does;

ii) It is permissible to approach the activities of an organisation on the basis that it has a main or primary aim which characterises its fiscal treatment;

iii) An organisation will not have aims of a civic nature if its objectives are solely (or perhaps mainly) for the benefit of its members.

44. The Tribunal dealt with this as follows. First it considered the legal test. In paragraph 35 the Tribunal said:

"I accept Mr Barlow's argument that the phrase in paragraph (e) of Item 1 to Group 9, "has objects" is inconsistent with the notion that they must be exclusively of the types listed thereafter. But that is not to say that all one has to do, to secure exemption, is to identify one object, however minor it may be in relation to the organisation's other objects, which falls within one of the listed categories; in that I agree with Mr Chapman. In my judgment it is apparent from reading the whole of the relevant part of the Item as I have set it out above that what is meant is that the primary object or objects of the organisation must fall within one or more of the categories listed. That conclusion seems to me to be what, in essence, the tribunal decided in Game Conservancy Trust. Mr Barlow did not suggest that the decision in that case was wrong; in my view the tribunal's reasoning was correct."

45. Mr Cordara criticised the Tribunal for approaching the case on the basis of having to identify the primary object or objects of an organisation. I do not agree with this criticism. It is, in my judgment, clear both from the Motor Institute case and the Expert Witness case that identifying an organisation's main object is one element in deciding whether it falls within the exception. In addition the Tribunal's use of the plural ("object or objects") clearly left room for the possibility that BASC might have multiple objects no single one of which could be said to be predominant.
46. On the facts, the Tribunal concluded (§ 36):

"Here, though I do not doubt that conservation and other public-spirited activities are seriously pursued and represent a substantial part of BASC's activities, the conclusion is inescapable that they do not constitute BASC's primary aim: … Its objects as they are set out in BASC's constitution, its mission statement and the material produced for members all make it clear that BASC is, primarily, a representative body for sporting shooters; its other activities are subordinate to that main aim. It follows that its claim that the residual subscription income is paid for an exempt supply can succeed only if that principal aim, of representing its members' interests, can properly be said to be of a political, philanthropic or civic nature, and in the public interest."

47. I see no legal error in this conclusion. The Tribunal has looked at BASC's constitutional document, supplemented it by reference to other materials from which, objectively, conclusions about its objectives can be drawn, and tested that against the reality of what it does. If it had been argued that the supply should be further dissected so as to separate out the "important" objective of conservation, it may be that the Tribunal would have come to a slightly different conclusion. But it was not. On the case as presented to the Tribunal, the Tribunal's conclusion was one to which it was entitled to come.
48. Finally the Tribunal considered whether BASC's primary objective (as identified) could be considered to be "civic" in nature. It said (§ 37):

"It does not seem to me possible to argue that the representation of its members' interests can conceivably be regarded as philanthropic or civic, since, whatever may be said of what I have found to be BASC's subordinate activities, representation of its members confers no benefit on the community at large, or in a particular locality (or localities), which I take to be what is connoted by "civic"."

49. The conferring of benefit on the community at large is in line with the explanation of the meaning (or one of the meanings) of "civic" as explained in the Expert Witness case. One of BASC's subsidiary complaints was that the Tribunal attached too little weight to BASC's registration under the Industrial and Provident Societies Act 1965. The Tribunal did take this fact into consideration. It cannot therefore be said that it ignored a relevant consideration. What weight it attached to that fact was itself a matter of fact, not of law. In my judgment there was no legal error in this conclusion.
50. On the question whether BASC's aims were "political" the Tribunal said (§ 40):

"Only clause (d) could realistically be regarded as political in character. I attach some, but not much, weight to its appearing fourth in the list; more important in my view are the facts that it is only one of four separate objectives, that it is in mild terms, and that (and not merely because of its placement) it seems to me to be no more than a means by which BASC can better pursue its primary aim of acting "as a representative national body for all sporting shooting": it does not, in my judgment, amount to an aim in itself. Construing the exempting requirements, as I must, strictly, I find it impossible to conclude that BASC's primary objects are of a political nature."

51. Mr Cordara argued that some of BASC's activities were undoubtedly political (e.g. representing the UK government in European negotiations). That may be so, but the fact that an organisation undertakes political activities does not necessarily mean that its aims are political. That is, for example, a well-known distinction in charity law. Moreover going down this route is again an attempt (which I have ruled against) to dissect the supply further on appeal. Again, on the basis of the case as presented to the Tribunal, I can see no legal error in this conclusion.

Result

52. However, for the reasons I have given in relation to the sports exception, I allow the appeal and will remit it to the Tribunal for further consideration in the light of this judgment.