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Cite as: [2004] UKVAT V18556

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Evangelical Movement of Wales v Customs and Excise [2004] UKVAT V18556 (06 April 2004)

VAT – Exemption – item 9, Group 7, Schedule 9, VATA 1994 "Health and Welfare" – whether camps run by a charity gave rise to supplies otherwise than for profit of welfare services – held they were – C & E Commrs. v. Bell Concord Educational Trust Ltd. [1989] STC 264 applied – whether such camps were directly connected with the provision of spiritual welfare – held they were – whether the camps were courses of instruction designed primarily to provide recreation or a holiday – held they were not – C & E Commrs. v. Redrow Group plc [1999] STC 161 and Plantiflor Ltd. v. C&E Commrs. [2002] STC 1132 considered – appeal allowed

Appeal with respect to an assessment raising an academic issue – Direction to amend the notice of appeal to constitute the appeal as an appeal with respect to the VAT chargeable on the supply of goods or services

LONDON TRIBUNAL CENTRE

THE EVANGELICAL MOVEMENT OF WALES Appellant

and –

THE COMMISSIONERS OF CUSTOMS AND EXCISE Respondents

Tribunal: MR JOHN WALTERS QC (Chairman)

MR RICHARD CORKE FCA

Sitting in public in Cardiff on 21 January 2004

Mr C Hawkins, AIIT, of the VAT Practice, Cinderford, Glos, for the Appellant

Mr Paul Key, of Counsel, instructed by the Solicitor for the Customs and Excise, for the Respondents

© CROWN COPYRIGHT 2004

DECISION

Introduction

In this appeal, the Appellant is The Evangelical Movement of Wales ("the EMW"), which is a registered charity with objects which can fairly be described as evangelistic in the promotion of, advice on, support and theological education and training in the EMW's Doctrinal Beliefs, which are set out in detail in clause 3 of its Constitution (as amended and approved in 2000), which was put in evidence before the Tribunal. The EMW's Doctrinal Beliefs are prefaced by the statement of a "Controlling Principle". This reads as follows:

"We believe the holy scriptures, as originally given, to be the infallible Word of God, of divine inspiration and therefore, we accept them as our sole authority in all matters of faith and practice."

The appeal is against an assessment made by the Commissioners on 18^th October 2002 in the principal sum of £29,661. That amount is assessed as output tax on supplies made by the Movement in the three quarters ended October 1999, 2000 and 2001 respectively (periods 10/99, 10/00 and 10/01) of EMW holiday camps (so described in the promotional leaflet including a "welcome", information, booking form and code of conduct for the camps in 2001, which was also in evidence before the Tribunal).

The issue in the appeal is whether or not the supplies of places at these camps, which were (and still are) run annually by the EMW from the end of July to the beginning of September, were within item 9 of Group 7, Schedule 9 to the VAT Act 1994 ("VATA").

Schedule 9 provides details of supplies which are exempt pursuant to section 31, VATA. Group 7 deals with "Health and Welfare", and item 9 (in the form having effect in the periods for which the assessment was raised) relevantly exempted:

"The supply, otherwise than for profit, by a charity or public body of welfare services and goods supplied in connection therewith."

Note (6) of Group 7 relevantly defined (and still defines) "welfare services" for these purposes as:

"services which are directly connected with–

…

(c) the provision of spiritual welfare by a religious institution as part of a course of instruction or a retreat, not being a course or a retreat designed primarily to provide recreation or a holiday."

Note (7) of Group 7 additionally provided (and still provides) that:

"Item 9 does not include the supply of accommodation or catering except where it is ancillary to the provision of care, treatment or instruction."

The terms of item 9 (though not of Note (6) or Note (7)) were subsequently amended with effect from 21^st March 2002. The relevant part of the amended version of item 9 is as follows:

"The supply by–

(a) a charity

…

of welfare services and goods supplied in connection with those welfare services."

Thus, the 2002 amendment removes the earlier requirement that the supply by the charity must be "otherwise than for profit".

The Commissioners identify the following four issues on all of which the EMW must satisfy the Tribunal on the evidence. They further contend that the EMW cannot so satisfy the Tribunal. The issues are:

(1) that the camps run by the EMW involve supplies made "otherwise than for profit";

(2) that the camps run by the EMW involve the supply of services which are "directly connected with the provision of spiritual welfare by a religious institution";

(3) that any provision of spiritual welfare is "part of a course of instruction or a retreat"; and

(4) that any provision of spiritual welfare as part of a course of instruction or a retreat is not provided as part of "a course or a retreat designed primarily to provide recreation or a holiday".

The background to the assessment – Direction to amend the notice of appeal

The issue of whether the supplies made by the EMW in connection with the camps are exempt for VAT purposes has been under intermittent consideration by the Commissioners since (at the latest) 1986. The Tribunal's bundle contains a letter dated 11^th February 1986 to the EMW from an Officer of Customs and Excise (Mrs. H.L. Hopkins) stating that "it is considered that although the activities of the camps do include the provision of spiritual welfare, the camps are nevertheless holidays provided for school children, and, as such, are taxable at the standard rate". That was essentially the position adopted by the Commissioners at the hearing of the appeal.

On 16^th September 1992, another Officer of Customs and Excise (Miss K. Fisher) wrote to the EMW saying "although you arrange outdoor and recreational activities during these gatherings you have explained that the main purpose is to provide bible study and Christian fellowship. On this information it would appear that these supplies are exempt". There is a suggestion that this view was confirmed in 1994. That was essentially the position adopted by the EMW at the hearing of the appeal.

The matter was raised for consideration again following the visit of another Officer of Customs and Excise (Mrs. C.M. Charles) to the EMW in 2002. An investigation was conducted, which included a reference to the Commissioners' Policy section at their Headquarters as a result of which Mrs. Charles communicated a decision to the EMW by a letter dated 16^th September 2002 that "on balance the Commissioners' decision is that VAT is chargeable". This decision was resisted by the EMW who invoked the earlier decisions that the supplies were exempt. The assessment was raised (as noted above) on 18^th October 2002 and the matter was referred to the Commissioners' Appeals and Reconsiderations Team. However by a letter dated 6^th November 2002, a Senior Officer of Customs and Excise (Mr. Brian Leyland) informed the EMW that he was upholding Mrs. Charles's decision to assess.

Even at this stage further reconsideration was given to the matter as seen in correspondence passing between another Senior Officer of Customs and Excise (Mr. S.J. Conyngham) at the Commissioners' Wales Appeals and Reconsiderations Team and Mr. Hawkins (who represented the EMW before the Tribunal). The result of this reconsideration was communicated to the EMW by Mr. Conyngham in a letter dated 26^th February 2003 in which he stated that "the Commissioners do not intend to collect the tax arrears of £29,661 [assessed by the assessment appealed against] plus interest thereon if the Tribunal confirms the standard-rate liability ruling", but that "the Commissioners' view is that the EMW must account for output tax on the income from its summer camps with effect from 16 September 2002, the date of Mrs. Charles's ruling".

In these circumstances the appeal against the assessment is rendered academic. When the Chairman raised this point at the hearing, Mr. Key, who appeared for the Commissioners submitted that as an award of costs (in favour of the Appellant) could depend on the outcome of the appeal, the appeal against the assessment is not academic. However it seems to the Tribunal that an otherwise academic dispute cannot be rendered effective simply because costs are incurred in pursuing it.

In the Tribunal's judgment, as a matter of the Tribunal's jurisdiction, the appeal is better constituted as an appeal against Mrs. Charles's ruling of 16^th September 2002 "that VAT is chargeable" than as an appeal against the assessment. That is, the appeal should be brought under section 83(b) VATA (an appeal with respect to the VAT chargeable on the supply of any goods or services) rather than under section 83(p) (an appeal with respect to an assessment). The Tribunal has power under rule 14 of the VAT Tribunals Rules 1986 (Amendments), for the purposes of determining the issues in dispute or of correcting an error or defect in an appeal, at any time to direct of its own motion that a notice of appeal be amended in such manner as may be specified in such direction, and we therefore direct that the notice of appeal be amended to show the appeal as brought against Mrs. Charles's ruling of 16^th September 2002 under section 83(b) VATA and proceed to deal with the appeal on that basis. This will involve a consideration of the law as amended with effect from 21^st March 2002, although as the appeal was argued by reference especially to the earlier law, we will also consider the issue raised thereby. Much of the evidence was concentrated on the periods covered by the assessments, but we also heard evidence relative to the current state of affairs relating to the camps, and we find that there is nothing that would render impractical our proposal to deal with the appeal as an appeal against the decision rather than the assessment. In the circumstances we consider that the amendment which we have directed will not affect the fairness of the hearing.

The Facts

The Tribunal heard oral evidence from Mr. Peter Hallam, the chief administrator of the EMW, responsible for the day to day running of the EMW and its "public face" for the media. It also heard evidence from Dr. Ian Garrero, the Chairman of the Standing Camps Committee of the EMW. Various documents, in particular the leaflet referred to in paragraph 2 above, were also in evidence.

From this evidence we find the following facts.

The EMW was started in the late 1940s as a Welsh-language grouping of people, adherents of the traditional evangelical faith, concerned for the spiritual welfare of Wales. A magazine was published "Y Cylchgrawn Efengylaidd" (the Evangelical Magazine), and this magazine is still published four times a year. The EMW was known in its early years as "the people of the magazine". An English-language sister magazine was also published, six times a year.

At an early stage in the EMW's history English-language and Welsh-language camps for young people became an annual feature.

The income from the camps accounts for about 6% of the total income of the EMW.

The camps cater for children and young people between the ages of 10 and 21. They take place at four centres, one of which is a campsite where the accommodation is under canvas. The camps usually last for between 7 and 10 days. The prices fixed for the year 2001 were £120 a place at the three centres with fixed installations and £78 at the centre which is a campsite.

The leaflet, styled in its "welcome" section as the EMW Camps 2001 brochure, make frequent references to stays at the camps as "holidays". It is also illustrated throughout with images of children (who appear to be younger than 18) enjoying recreational activities.

There is a section in the leaflet headed "Information about the holidays". We quote parts of that section (in its English-language version)as follows:

"COST

Holiday fees (inclusive of trips) are shown overleaf. You must pay a non-returnable deposit of £25 when you book, but you can also pay part of the fees if you wish. Full payment must be received by 31^st May 2001, but if you are able to pay earlier, that would help. If you receive Income Support, Family Credit of the new Working Family Tax Credit you may request a reduction in fees. …

BOOKING

Please complete the booking form and medical certificate, and sent to [name and address]. You must include 4 SAEs addressed to your parents or guardians, for each camp you apply for. …

IMPORTANT

To make sure everyone has an enjoyable time, it is vital that the holiday leader understands any educational, behavioural or medical needs (including allergies). When you book, please ensure you have completed the medical form as fully as possible. Failure to do so could result in a young person having to return home. All information is treated confidentially. …

AFTER BOOKING

Once your place is confirmed, you will receive a confirmation letter, and further information about the holiday. If no places are available on the first choice holiday, you will be contacted regarding an alterative. …

PROGRAMME

Our aim is to provide a first class holiday with activities to suit most tastes. We expect everyone to take part in the full programme unless they're unable to do so. Every camp is different, but team games, loads of activities, trips and free-time give plenty of opportunity to make new friends and have a great holiday. An important part of the programme will be the times set aside each day for talks and discussions on the message of the Bible."

We quote in full the section in the leaflet headed "Code of Conduct"

"We intend to have a great fun week together that is enjoyable for everyone. For some, sharing the week with 50 or so others will be unusual, but it will just add to what makes this holiday a different experience. However, for it to work safely for everyone's benefit there will be some ground rules and other terms based on the biblical standards to which the EMW holiday camps are committed. The terms and conditions below in part reflect those standards.

Participation: It is expected that everyone will be involved in the daily programme of activities which includes a daily camp service and group Bible studies.

Safety: For your own safety and that of others, you will be required to follow the instructions of the group leaders during all the activities of the week.

Damage and theft: Wilful damage to the Centre's property or anyone else's belongings, or any act of theft, will not be tolerated.

Accommodation: Under no circumstances may you enter the room of a member of the opposite sex. You are not permitted to enter the room of another guest unless invited to do so.

Personal conduct: Acceptable standards of behaviour will be required. Behaviour that is not acceptable will be dealt with firmly.

Alcohol, smoking, etc.: No alcohol or smoking is allowed in any part of the Centres or their grounds. There will be no smoking or alcohol in camp buses or during organised group activities. Possession and use of any substances classified as illegal by HM Government is forbidden.

Audio equipment: In the interests of safety, good communication and the avoidance of nuisance, the use of any personal audio equipment (TV, computer games, cassette, radio or CD players) will not be permitted.

Please note that in completing the booking form you promise to observe camp rules. We very much hope that by making the ground rules clear at this stage it will not be necessary to deal with anyone for breach of this code. The rules are for the good of all, so the leaders feel it is very important that they are upheld. Any breaking of the rules, therefore, will be dealt with firmly. A deliberate breaking of the rules could lead to expulsion from the Centre without any refund of fees."

The leaflet contains a "Booking Form and Medical Certificate". This requires details of the "camper", that is, the child or young person proposing to attend the camp, and is phrased in part (as to the "booking details") on the basis that the camper himself (or herself) will fill in the details, and in part (as to the "medical details (confidential)" as if the camper will not fill in the details but that his (or her) parent or guardian will do so.

Thus, the camper is invited to answer such questions as "if you would like to share a tent/dorm with a friend, write their name here" and in particular is required to sign an undertaking as follows: "I promise to observe the camp code of conduct".

But in the section dealing with medical details, "parent/guardians are asked to authorise the leader to act in their absence where urgent medical treatment becomes necessary", and the form continues: "if you agree to this, please sign here", with a space for a signature.

Finally, at the foot of the booking form there is a space for the signature of the "Parent/Guardian" alongside the words: "parent/guardian must sign if camper is under 18".

In fixing the prices for attendance at the camps, the EMW aims to keep prices as low as possible while at the same time being sure to cover costs. The EMW does not see the camps as a source of profit. Sometimes in fact the operation of the camps yields a surplus – sometimes a deficit is incurred.

We were shown figures for the income and expenditure related to the indoor and outdoor camps for the five seasons from 1999 to 2003 inclusive. The figures did not take account of all related expenses – the time of the staff at the EMW's Head Office in approving the brochure and the design and distribution costs of the brochure were not included. Nevertheless, such as they were, the figures showed operating surpluses in 1999 of £1,255 (against total income from camps of £86,853), in 2000 of £4,221 (against total income from camps of £82,642) and in 2001 of £4,743 (against total income from camps of £68,641) and operating deficits in 2002 of £1,642 (against total income from camps of £63,127) and in 2003 of £2,700 (against total income from camps of £58,046).

The personnel running the camps are volunteers without payment. Many of them are professionally involved in education or social work. The EMW expects certain volunteers (officers) to make a contribution to their board and lodging at the camps.

The EMW maintains a Welsh Camps Committee which oversees the work of the camps and ensures that the overall aims of the EMW are met in the running of the camps. Its also arranges training for officers, leaders and chaplains who take part in the camps.

The camps take place in the summer school holidays. They take place in the school holidays because campers who are of school age cannot be taken out of school to attend the camps. They take place in the summer because it is difficult for officers to give up time at other times of the year and also because the weather conditions in summer are favourable for the activities. The EMW has at some time attempted to run a camp at Easter but there was a poor response from campers and the time was difficult for the officers.

The Tribunal was shown a typical timetable for a camp (one that ran from 3^rd to 10^th August 2002). The programme started with breakfast at 8:30 a.m. and at 10:00 a.m. there was a service. The service seems to have been longer on the first full day of the camp, being a Sunday (4^th August 2002), but a service was repeated at the same time (10:00 a.m.) on each morning for the duration of the camp. From 11:15 a.m. (on Tuesday, Wednesday and Friday, 11:30 a.m.) organised activities took place. On two days of the week this took the form of an outing or day trip (to Barmouth on Tuesday and to Snowdon or Chester on Thursday). On other days various recreational options were offered (for example football, volleyball and crafts). After lunch each day (other than Sunday, Tuesday and Thursday) the afternoon was taken up with a recreational activity, for example "gully-bashing" (walking up a fast-flowing stream). The afternoons of Tuesday and Thursday were taken up with the outings. Sunday afternoon from 2:15 p.m. to 3:30 p.m. was a time scheduled for a "seminar choice". This is explained as a choice of at least four seminars on relevant, topical issues from a biblical point of view. There was also time scheduled for a "seminar choice" on Tuesday and Thursday at 8 p.m., so that campers would be able to attend three out of the total of four seminars being organised. The evening meal on Sunday was at 5:15 p.m. allowing the campers to attend an evening service in Bala at 6:30 p.m. On other days the evening meal was at 6:30 p.m. (or 6 p.m. on Wednesday and Friday). After the evening service on the Sunday, there was a Fellowship Meeting. On other evenings there were Bible studies (on Monday, Wednesday and Friday) and the "seminar choice" times, as we have indicated (on Tuesday and Thursday). On Monday, Tuesday, Wednesday and Thursday, there followed a "Lounge Session" at 9 p.m. A "Lounge Session" would either be recreational or would be taken up with spiritual matters, such as questions arising from a sermon or testimonies given by officers or older Christians as to their Christian experience. The late evening slot was taken up on Friday, the last evening of the camp, by a "Grand Finale", which we understand to have been a party, described on the EMW's website as "an opportunity for everyone to display their talents, or lack of them, in all kinds of sketches, or to take part in the traditional 'chubby bunny' competition". The last item in the day (at 10 p.m. or 10:30 p.m.) was "Cocoa and Bed" or "Epilogue and Bed".

We were not told what age range of children or young people attended the camp whose timetable we have summarised, but we were told that the activities would be varied to make them suitable for the ages of the campers. The programmes would be arranged to make the overtly bible-based activities more prominent for camps attended by older children or young people and less prominent for camps attended by younger children.

The programmes are quite rigidly controlled. Any variations suggested by camp leaders would be fixed in advance and approved by the appropriate officer or Committee of the EMW. Participation in the full programme of a camp by every camper is compulsory.

In answer to questions put in cross-examination by Mr. Key on behalf of the Commissioners, Mr. Hallam was at pains to stress that the EMW saw the whole camp as a "spiritual experience" for the participants. The recreational activities, no less than the formal meetings, for example the seminars, are intended by the EMW to contribute to the spiritual development of the participants. Mr. Hallam emphasised that the activities are lead by committed Christians "who will share with the participants a living practical faith". The EMW does not think in terms of the timetable being split between secular and spiritual topics. We accept Mr. Hallam's evidence as to the EMW's purposes and intentions on these points and generally.

There was before the Tribunal a page from the EMW's website containing an article entitled "What is Camp like?" by Aled Davies, a camper in 2003 (and a person who had attended seven camps previously). Aled Davies did not give evidence before us. The article had been originally published in the Evangelical Magazine (as noted above, this is the EMW's English-language magazine). Aled Davies based his article around his formulation of "the three main ingredients of a camp" which he called "fun, food and fellowship".

The comments on "fun" were descriptions of the various recreational activities which we have already described. The comments on "food" stressed how good it was and what a lot of work went into providing it. The comments on "fellowship" described fellowship with other campers – the opportunity to meet old friends and make new ones. Aled Davies remarks that "despite having many differences, union in Christ allows people with totally different personalities to bond" and that he thinks that "the strongest relationships are formed when Christians are discussing spiritual matters and this certainly was illustrated on senior camp this year (2003) when everyone was interested in getting stuck into God's word". Aled Davies goes on to say that:

"above all there is fellowship with God; this is the main purpose of camp. Apart from the fun, food and fellowship with other campers, Christian campers, officers, leaders and chaplain alike should be at camp in order to meet with God. God speaks in many ways on camp: through the meetings, the bible studies, the witness of officers, and the conversation of campers. Some people have also turned up to camp having no intention of meeting with God and have met Him for the first time in their lives and been converted. God is doing amazing work on camps."

Mr. Hallam was taken to a part of this passage in cross-examination by Mr. Key, who put it to him that people who turn up at camp having no intention of meeting with God presumably have come to have a holiday. Mr. Hallam's response was that he hoped that all campers have had a holiday, a break from routine, and suggested that "meeting with God" was not a matter of ordinary intention as to how one might spend one's time. He said: "Some people who haven't met God look back on the week as having set them thinking. God moves in mysterious ways." We conclude that Aled Davies in the sentence referred to was talking about people's conscious intentions, but that Mr. Hallam was suggesting that below a conscious intention "not to meet with God" there may lurk an unconscious intention to seek God out – which sometimes does, and sometimes does not result during the week of the camp in a consciousness of having "met with" God. Again, on the basis of this evidence, we find that the intention of the EMW and the personnel associated with it was to provide in the camp programmes occasions when this sort of spiritual awareness could or would be awakened.

The promotional leaflets which we have described above are not sent out to the general public but to churches, church groups and Christian youth leaders. Most of the campers come back year after year and a number of them then become officers, with leadership roles in the camps in later years. Most of the new campers who come, come on the recommendation of other campers who have been on camps before. Advertising otherwise for the camps is through two English-language Christian newspapers and one Welsh-language Christian newspaper and the EMW's website. The website has (at the latest estimate) 130 "hits" a day, although very often "hits" would represent the same people coming back. Mr. Hallam's evidence was that in his view people visiting the website would be likely to be people looking for Christian entities. There was no evidence to suggest otherwise.

When asked by Mr. Key whether the paragraph headed "Programme" (which we have quoted above) in the section in the leaflet headed "Information about the holidays" was an accurate reflection of the camp programmes, Mr. Hallam replied that parents would want to send their children to the camps anyway, but that children will see the brochure and the EMW wants to make it attractive to them. Again, we accept Mr. Hallam's evidence on this point. The paragraph headed "Programme" is, we find, not an accurate reflection of the camp programmes in reality, because it does not fairly summarise the timetable which we have described at length above.

Mr. Hallam refused to accept Mr. Key's suggestion when it was put to him, that the camps were designed to provide first class holidays, with an important part being discussions on the meaning of the Bible. He said that that would be outside the EMW's aims. The EMW's purpose in designing the camps was to promote the Gospel. Again, we accept Mr. Hallam's evidence on this point.

Mr. Hallam accepted that the camps were not retreats as that word was defined by Mr. Key (as a "move away from normal day to day activities to concentrate on spiritual development to the exclusion of non-necessary activities"). Mr. Hallam asserted that the camps did not provide a monastic experience. They are specifically aimed to make known the Christian faith in a context which is natural and normal for children and young people. Again, we accept Mr. Hallam's evidence on this point.

In the context of whether the camps could be described as "course[s] of instruction", Mr. Hallam's evidence was that instruction takes place during the whole of the week, especially but not exclusively in the formal sessions of Bible study and Question Time. He said the camps provided instruction on how Christians who take their faith seriously behave and live. He accepted that the camps were not advertised as courses of instruction on the leaflet. While noting and accepting this evidence as to the EMW's intentions, we observe that the meaning of "course of instruction" in Note (6) of Group 7 of Schedule 9 to the VATA is a legal question of statutory interpretation to which we shall turn later – see paragraph 77 below.

The provision of camps, like the provision of bookshops, is an activity of the EMW which it carries out to promote the mission of evangelical churches in areas where the churches themselves are unable to operate.

The EMW's Standing Camps Committee coordinates the EMW's work in relation to camps. It formulates policies and trains leaders and officers. There are two leaders on each camp (one male and one female) and also a chaplain. Most chaplains are ordained persons, but some are not. The services at the camps are tied in to specific, predetermined, themes, which continue through the week. Examples of such themes are: Moses; Love; and the relation of the Christian faith to contemporary life. These themes are not advertised beforehand, but a letter is sent to each camper from the leaders in advance of the camp, and the theme to be followed in the camp may be developed in the letter. The letters instruct campers to bring their Bibles. The Tribunal was not shown any examples of such letters. After the camps, the Committee evaluates what went on in the camps, to improve things and make strategies for future camps to be (in the Committee's opinion) relevant and helpful to young people. These evaluations are assisted by Questionnaires returned by the campers. The Tribunal was not shown any examples of such Questionnaires, but Dr. Garrero told us, and we accept, that some Questionnaires do mention the spiritual side of the programme.

Dr. Garrero's unchallenged estimate was that 90% of the campers are individuals who have been on a previous camp, and only 5% of the campers come from a background "not already imbued by the EMW".

There is a fund maintained by the EMW from gifts for the purpose – the "Aunty Bessie Fund" – which is earmarked to help with the camp fees of individuals who would otherwise be unable to attend the camps. This help is additional to the reduction given to those receiving Income Support or other benefits, who request it. Additionally some camp fees are paid in whole or in part by churches sending young people to the camps. This support is unconnected with the EMW.

The Submissions

Mr. Hawkins submitted that the camps run by the EMW involve supplies made "otherwise than for profit" because the EMW had no intention to make a profit, but had to (and did) set out to break even. He submitted that the exemption applied because on the evidence of the witnesses from the EMW it was clear that the camps were part of a course of instruction in spiritual welfare which was not designed (by the EMW) primarily to provide recreation or a holiday. He stressed that it was not within the aims or objects of the EMW to arrange camps designed primarily to provide recreation or a holiday. He submitted that neither the parents of campers nor the campers themselves were unaware of the spiritual nature of the camps. He relied on this fact and on the fact that 90 to 95% of campers were "returners" to make a submission that there was likely to be little or no distortion of competition, so far as the providers of other "secular" holidays were concerned. He submitted that the camps have very little secular appeal. He drew support from Aled Davies's comment in his article on the EMW website: "[b]ut above all there is fellowship with God; this is the main purpose of camp".

Mr. Key submitted that this area was almost free from authority. He cited the decision of the European Court in Stichting Uitvoering Financiële Acties v Staatssecretaris van Financiën (Case 348/87) for the proposition that exemptions must be interpreted strictly, and the decision of the Tribunal (Chairman: Mr. J.F. Easton) in League of Friends – Poole General Hospital (Decision 10621, release date 9^th June 1993) on the question of whether the supplies were made otherwise than for profit. The Tribunal in that case decided that a provision by Hospital Friends of trolley telephones for patients for charges that gave rise to "an increasing surplus" was not a "supply, otherwise that for profit".

He addressed the four issues identified in paragraph 9 above as follows:

(1) that the camps run by the EMW must involve supplies made "otherwise than for profit". He relied on the figures showing operating surpluses for the three seasons 1999, 2000 and 2001. He suggested that the figures showing operating deficits in the seasons 2002 and 2003 were irrelevant, because the assessment appealed against covered the earlier seasons and not the later seasons. He recognised that the legislation applicable to periods after March 2002 makes no requirement that exempt supplies must be made "otherwise than for profit".

(2) that the camps run by the EMW must involve the supply of services which are "directly connected with the provision of spiritual welfare by a religious institution". On this issue he said the Commissioners did not have a positive case and agreed that it was open to the Tribunal on the evidence which it had heard to decide this issue in the EMW's favour.

(3) that any provision of spiritual welfare must be "part of a course of instruction or a retreat". He submitted that a course of instruction (the Appellant not suggesting that the camps were retreats) must have a clear structure as a course, which he submitted the camps did not. Further, he submitted that the question must be framed not on the basis of what the EMW thought they were providing but on the basis of what the prospective campers were expecting. The evidence on this point (the leaflet) indicated that a prospective camper expected a camp to be a holiday, rather than a course of instruction. This was confirmed by the Aled Davies's article on the EMW website.

In connection with this issue Mr. Key made the technical submission that the supplies of places on the camps were made to the campers, rather than (in the case of children under 18) to their parents or guardians who were the contracting parties. He cited Customs and Excise Commissioners v Redrow Group plc [1999] STC 161 and Plantiflor Ltd. v Customs and Excise Commissioners [2002] STC 1132, although he did not have copies of these authorities at the hearing and so made no detailed submissions by reference to them.

It was an important part of his submissions that the expectations of those attending the camps was either determinative of or at the least highly significant in determining the objective nature of the supplies. He pointed out that the evidence had been that for younger children's camps there had been relatively less spiritual content. He relied on the reference in Aled Davies's article on campers coming to a camp with "no intention of meeting God" and also on Aled Davies's emphasis on the camps being "fun, food and fellowship".

(4) that any provision of spiritual welfare as part of a course of instruction must not be provided as part of "a course … designed primarily to provide recreation or a holiday". Mr. Key submitted that this issue raised a higher hurdle than the third issue. There was significant evidence that the camps were designed primarily to provide recreation or a holiday. He referred to the leaflet, with its repeated reference to "holiday" and "holidays" and in particular to the "Information about the holidays" and the paragraph headed "Programme". He accepted that the statutory wording envisaged that a course of instruction could be one designed incidentally to provide recreation or a holiday, but he submitted that that was not this case. He emphasised that the test is whether a course, looked at objectively, is designed primarily to provide recreation or a holiday. He submitted that it would be incorrect to look only at the intentions of the suppliers (the EMW), although he accepted that a finding that the suppliers were strongly spiritually motivated in making the supplies would be relevant to the determination of this issue.

Decision

We take the identified issues in turn.

(1) that the camps run by the EMW must involve supplies made "otherwise than for profit". The Tribunal considers that this issue must be resolved by reference to the Court of Appeal's decision in Customs and Excise Commissioners v Bell Concord Educational Trust Ltd. [1989] STC 264. Although this authority was not cited by either party, the Chairman indicated at the hearing that the Tribunal would refer to it before reaching its decision. No objection was made at the hearing to this course of action.

Bell Concord was a case on Item 2(a) of Group 8 of Schedule 6 to the VAT Act 1983, which provided exemption for "the provision, otherwise than for profit, of (a) education or research of a kind provided by a school or university". The sole question in the case was whether the provision of education by the company (which was a charity) was 'otherwise than for profit' within the meaning of that provision (see: ibid. at p.266a/b). In Bell Concord, unlike in this case, the company budgeted to make (and achieved) a surplus each year. The company in Bell Concord planned to apply its accumulated surpluses in the future for its charitable purposes. It was common ground in Bell Concord that the purpose, intention or motive of the supplier (as indicated by its constitution) was determinative of the issue of whether the supplies were provided otherwise than for profit. The Court of Appeal in Bell Concord unanimously held that the company was making supplies otherwise than for profit because the surpluses could never redound to the profit of any individual but were required to be applied for the company's educational charitable purposes – focussing on the objects for which the company was established, irrespective of its budgeting policy from time to time.

In the Tribunal's judgment, the Commissioners' submissions in this case on this issue run contrary to the decision in Bell Concord. As we understand those submissions, the Commissioners did not accept, as they had in Bell Concord, that the purpose, intention or motive of the EMW, as indicated by its constitution, was determinative.

There was no evidence before the Tribunal as to the purpose intention or motive of the EMW as indicated by its constitution as to the disposition of surpluses arising from time to time on its activities. In particular, the Constitution (referred to in paragraph 1 above) relevantly provides only that the Management Committee and the Executive Committees will achieve "a balance between the pursuit of the Movement's Aims and Objects and the need for financial prudence" (Clause 6). There is provision for Standing Orders to be prepared, updated and approved by the Management Committee "in order to enable all the committee members officers and staff to conduct the Movement's work in an informed, orderly and ethical manner". In particular, Standing Orders are to contain "organizational and procedural arrangements approved by the Management Committee for the conduct of those aspects of the Movement's work which are referred to in [the] Constitution". (Clause 13) We were not referred to any Standing Orders.

We note, however, that the EMW is a registered charity and therefore infer that, organisationally, it may only carry on a trade or business in order to achieve its purposes, and provided that no part of any profit made can be distributed to members or applied otherwise than for charitable purposes (see: Incorporated Council of Law Reporting for England and Wales v Attorney-General [1972] Ch 73).

As to our findings of fact bearing on this matter, they are that the EMW aims to keep prices as low as possible while at the same time being sure to cover costs, and that the EMW does not see the camps as a source of profit (paragraph 29 above).

We are therefore satisfied that, applying the ratio of the Court of Appeal's decision in Bell Concord, the EMW makes supplies of places at the camps "otherwise than for profit". Indeed this is clearer in this case than the comparable question was in Bell Concord itself, because, unlike in Bell Concord, there is, in this case, no policy to achieve surpluses year on year. Also, unlike in League of Friends – Poole General Hospital, the charges made by the EMW do not give rise to "an increasing surplus". We accept that (very small, in percentage terms) surpluses were in fact achieved year on year between 1999 and 2001, but there were deficits in the following two years. On the basis that we are considering the question of the VAT chargeable on the supplies of places at camps generally, rather than the assessment, which covers the three seasons in 1999 to 2001 (see: paragraph 15 above) the evidence that the supplies are made "otherwise than for profit" is even clearer. But our conclusion would be the same even if we were confined to looking at the seasons covered by the assessments. This issue does not arise in relation to supplies made after 20^th March 2002 (see: paragraph 7 above), but, in relation to earlier supplies, we decide this issue in favour of the EMW.

(2) that the camps run by the EMW must involve the supply of services which are "directly connected with the provision of spiritual welfare by a religious institution". On the facts found, without doubt the EMW have established their case on this issue and we so hold. The direct connection with the provision of spiritual welfare is apparent even from the paragraph headed "Programme" in the section in the leaflet headed "Information about the holidays" on which the Commissioners place much reliance generally. That paragraph concludes: "An important part of the programme will be the times set aside each day for talks and discussions on the message of the Bible".

(3) that any provision of spiritual welfare must be "part of a course of instruction or a retreat". It is convenient to consider this issue together with the next: (4) that any provision of spiritual welfare as part of a course of instruction must not be provided as part of "a course … designed primarily to provide recreation or a holiday".

It was in connection with issue (3) that Mr. Key mentioned the cases of Customs and Excise Commissioners v Redrow Group plc [1999] STC 161 and Plantiflor Ltd. v Customs and Excise Commissioners [2002] STC 1132. However those decisions do not establish the propositions for which Mr. Key contended – that the supplies of places on the camps were made to the campers, rather than (in the case of children under 18) to their parents or guardians who were the contracting parties.

Redrow concerned a tripartite arrangement between Redrow (who sold homes), a potential customer of Redrow who had a home to sell (an "existing home") and estate agents who were instructed to sell the existing home. Redrow chose the estate agents, instructed them, and paid their fees. The House of Lords held on these facts that the estate agents supplied a service to Redrow in return for the consideration paid by Redrow to the estate agents and that that service was "something being done for [Redrow] for which in the course or furtherance of a business carried on by [Redrow], [Redrow] has had to pay a consideration which attracted VAT" (ibid. at p.166d per Lord Hope). The prospective purchaser (in a case where the estate agent's fees were paid by Redrow) also received a service as part of the same transaction – but that service was not the subject matter of a supply for VAT purposes, by reason of the absence of consideration moving as a quid pro quo (cf. per Lord Millett, ibid. at p.171d/e).

Plantiflor relevantly concerned a tripartite arrangement between Plantiflor (a seller of bulbs), a customer, and Royal Mail Parcelforce which delivered the bulbs sold by Plantiflor to the customer. The issue raised by the case was whether the delivery charges attracted VAT. The contract between the customer and Plantiflor provided that Plantiflor delivered every order direct to the customer's home, but also that delivery was arranged through Royal Mail Parcelforce by Plantiflor on the customer's behalf on payment by the customer to Plantiflor of a postage and handling charge to be advanced to Royal Mail Parcelforce by Plantiflor on the customer's behalf. Plantiflor had entered into a five-year contract with Royal Mail Parcelforce for the delivery of its products to its customers at specified prices. The House of Lords held that on these facts Plantiflor had made to the customer a supply of bulbs delivered to the customer (or a supply of bulbs and a supply of a service of arranging for Royal Mail Parcelforce to deliver them), in consideration of the full amount paid by the customer, including the postage and handling charge. Royal Mail Parcelforce had made to Plantiflor a supply of services of delivery of Plantiflor's goods to Plantiflor's customer, in consideration of the amount paid by Plantiflor to Royal Mail Parcelforce under the contract between them. There had been no supply for consideration by Royal Mail Parcelforce to Plantiflor's customer, even though that customer had benefited from the services supplied by Royal Mail Parcelforce.

In our judgment, the principles emerging from the decisions in Redrow and Plantiflor show that on the facts of this case supplies are made by the EMW to the party who, as principal, is paying for them. That party (the recipient of the supply for VAT purposes) will, in the case of places at camps sold to be taken by children and young people under the age of 18, be the parent/guardian who signs the booking form – see: paragraph 28 above. In the case of places at camps sold to be taken by young people aged 18 or more, the recipient of the supply made by the EMW is the camper himself or herself.

However the decisions in Redrow and Plantiflor also recognise that tripartite transactions of this kind can give rise both to a supply of services for VAT purposes from A to B, and also to provision of services by A to C, who receives them. The services supplied by A to B can, and probably will, be of a different description to the services provided by A to C.

The question posed in this case by item 9 of Group 7 of Schedule 9, VATA, read in conjunction with Note (6)(c) of Group 7 – the question with which the identified issues (3) and (4) are concerned – is whether the services supplied by the EMW are supplied "as part of a course of instruction not designed primarily to provide recreation or a holiday".

It seems to be a clear inference from the wording of Note 6(c) that a qualifying course of instruction can be designed secondarily or incidentally to provide recreation or a holiday. Mr. Key for the Commissioners accepted that this was so. The Tribunal is concerned to decide whether as a matter of reality the substance of what is supplied by the EMW is "a course of instruction not designed primarily to provide recreation or a holiday".

Mr. Key submitted that we must apply an objective test – that is, decide the issue by reference to whether or not the EMW supplied in substance a course of instruction which, looked at objectively, was not designed primarily to provide recreation or a holiday. We accept that this is the correct test. It is not sufficient that the EMW's motives and intentions in designing the camps were not primarily to provide recreation or a holiday.

We consider that the factual question of the objective nature of the camps is crucial. If we find that objectively they were not designed primarily to provide recreation or a holiday, in our judgment it follows, on the primary facts that we have found, that the camps were courses of spiritual instruction. As a matter of objective categorisation, we can see no tertium quid. We reject the Commissioners' submission that a course of instruction must have a particular structure.

In determining the objective nature of the camps we consider that we must look at all the evidence, not merely the intentions of the EMW, on the one hand, or the terms of the leaflet, on the other.

In our judgment, based on the facts found, the EMW (the supplier of places at the camps) intended to supply courses of spiritual instruction and not recreation or holidays. In their eyes the elements of recreation or holiday were incidental to the true nature of the camps as courses of spiritual instruction.

Children who were potential campers (at any rate children considering attending a camp for the first time and, possibly, younger children for whose camps the arrangements included relatively little explicit spiritual content) would in our view be likely to regard a camp as recreation or a holiday, rather than a course of spiritual instruction or even an extended "Sunday School" experience. We consider that a reading of the promotional leaflet as a whole, and of Aled Davies's article on the EMW's website, leads to this conclusion.

The parents or guardians of children who were potential campers (even children whose parents or guardians (or who themselves) were considering attending a camp for the first time) are unlikely in our judgment to regard a camp as recreation or a holiday, rather than a course of spiritual instruction. Taking the timetable which we have described at paragraph 34 above as typical – and bearing in mind that participation in the full programme of a camp by every camper is compulsory (see: paragraph 37 above) – in our judgment the actual experience of a camp (rather than the description of it provided in the leaflet) is correctly described on the ordinary objective meaning of words as a course of spiritual instruction designed secondarily or incidentally to include recreation or a holiday.

We find that those campers who were "returners" (which amounted to a very high percentage of all campers, and included most or all of those over the age of 17) would know from experience the objective nature of the camps, which we have found to be a course of spiritual instruction not designed primarily to provide recreation or a holiday. They approached the choice of whether or not to return with the benefit of this knowledge.

We also find that the parents of campers under the age of 18, whether those campers were "returners" or not would know either from experience or through their evangelical church connections the true objective nature of the camps as we have described it. In this connection we accept Dr. Garrero's estimate that 90% of the campers are "returners" and only 5% of the campers come from a background "not already imbued by the EMW" –see: paragraph 48 above. They approached the choice of whether or not to take up places at camps either themselves or for children under 18, with the benefit of this knowledge.

We find that the suppliers (the EMW) and the recipients of the VAT supplies (campers over the age of 17 and parents or guardians of campers under the age of 18) and other campers who are "returners" regard the objective nature of the camps as a course of spiritual instruction not designed primarily to provide recreation or a holiday. Does our finding that children who were potential campers (at any rate children considering attending a camp for the first time and, possibly, younger children for whose camps the arrangements included relatively little explicit spiritual content) would be likely to regard a camp as recreation or a holiday, rather than a course of spiritual instruction – see: paragraph 80 above – lead to a conclusion that the objective nature of the camps is that they were designed primarily to provide recreation or a holiday?

In our judgment it does not. There appears to us to be logic in determining the objective nature of a supply for VAT purposes by reference to all the facts found, but by nevertheless giving special emphasis to what the recipient of the VAT supply can objectively be inferred to have expected to receive in return for the consideration he provided. That approach gives special emphasis to the viewpoint of parents and guardians of younger campers and campers aged 17 and above. We have regard also to the Commissioners' submission (which we accept) that the rationale of the restriction of exemption to those courses which are not designed primarily to provide recreation or a holiday is the need to avoid distortion of competition by allowing what are in substance holidays to enjoy exemption under the cloak of being in some subordinate measure courses of spiritual instruction. Young children who were potential campers (or at any rate children considering attending a camp for the first time) and young "returners" whose previous experience of camps included relatively little explicit spiritual content, can be taken generally to have no independent freedom of action to choose to go on one holiday rather than another and so their decisions are unlikely to give rise to distortion of competition. We conclude that the stated rationale for the restriction of the exemption is not engaged by our finding that such children would be likely to regard a camp as recreation or a holiday, rather than a course of spiritual instruction. We therefore confidently conclude on the basis of the facts found as a whole that the camps run by the EMW are courses of instruction not designed primarily to provide recreation or a holiday.

Our decision is therefore that the supplies of places at the camps by the EMW attracts exemption from VAT under item 9 of Group 7 of Schedule 9 to the VATA and that Mrs. Charles's ruling of 16^th September 2002 was incorrect. The appeal is therefore allowed.

At the hearing Mr. Hawkins made an application for costs in the event that his Client was successful. We allow that application and direct the Commissioners to pay within 28 days of the release date of this Decision the EMW's costs of and incidental to and consequent upon the appeal to be taxed by a Taxing Master of the Supreme Court or a district judge of the High Court in default of agreement (Rule 29(1)(b) of the VAT Tribunals Rules 1986 refers).

We record that because there are a number of aspects of this Decision which concern matters not properly developed in argument at the hearing of the appeal (for example, the question of whether the appeal against the assessment was academic) we arranged for the Tribunal Centre to furnish the parties with a copy of our Decision in draft – being at that stage a provisional decision – and to invite the parties, if they so wished, to list the appeal for further argument on these aspects. We allowed the parties 21 days from the date of the Tribunal Centre's letter (8^th March 2004) to do this. At the expiry of this time limit the Tribunal Centre had received no response from the Appellant and a letter from the Respondents indicating that they did not wish the matter to be relisted.

JOHN WALTERS QC

CHAIRMAN

RELEASED:

LON/02/1050

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