United Kingdom VAT & Duties Tribunals Decisions

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Cite as: [2005] UKVAT V19146

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19146

EXEMPTION – Sport – Services of Hockey's governing body – Governing body provides sport-related services to affiliated hockey clubs – Clubs are unincorporated associations – Whether services of governing body supplied to persons taking part in sport – Yes – EC Sixth Directive Art 13A.1(m) VAT Act 1994, Schedule 9, Group 10, item 3

LONDON TRIBUNAL CENTRE

CANTERBURY HOCKEY CLUB Appellants

& CANTERBURY LADIES HOCKEY CLUB

and –

HER MAJESTY'S REVENUE AND CUSTOMS Respondents

Tribunal: STEPHEN OLIVER QC (Chairman)

DIANA WILSON

Sitting in public in London on 26 May 2005

M G MacDonald, member of Canterbury Hockey Club, for the Appellants

Nicola Shaw, counsel, instructed by the Acting Solicitor for HM Customs and Excise, for the Respondents

© CROWN COPYRIGHT 2005

DECISION

Canterbury Hockey Club and Canterbury Ladies Hockey Club (referred to collectively as "Canterbury Hockey") appeal against a decision of the Commissioners (in a letter of 13 October 2003). The decision related to supplies of England Hockey Ltd ("England Hockey") rendered to its affiliated clubs in return for affiliation fees. The issue is whether, as the Commissioners have ruled, the supplies are standard-rated or whether, as Canterbury Hockey have contended, those supplies are exempt by virtue of Article 13A.1(m) of the Sixth Directive which requires that the supplies be services "to persons taking part in sport"

Background facts.

Canterbury Hockey Club and Canterbury Ladies Hockey Club are both members clubs. The former has some 140 adult members, each of whom pays an annual subscription for his rights of membership. It fields ten teams. Canterbury Ladies Hockey Club has some 90 adult subscription-paying members; its fields five teams. Both clubs have junior sections, the members of which may pay match fees to the club in question. Neither club is incorporated; it is not in dispute that both are unincorporated associations.

England Hockey was incorporated in December 2002 as a company limited by guarantee. It is a charity and its objects include the encouragement and development of hockey in England, the provision of training and instruction in hockey of players, umpires, coaches and officials, the arrangement of national leagues and other competitions, the selection and training of national teams and the arrangement of international matches and tours. Other objects include the making of regulations "to control the conduct and activities of members, … drug abuse and produce guidelines on health and safety, child protection, equality and other areas as applicable", the organization of umpiring and umpire coach education and to organize insurance schemes for members.

There is no dispute that England Hockey is a non-profit making body. Its members include the "Regional Associations" (such as the Southern Counties Hockey Association), the counties and listed "affiliated clubs" which include Canterbury Hockey.

The affiliation fee charged by England Hockey to each affiliated club is £165 for each team fielded by the particular club. England Hockey has charged value added tax on the affiliation fees.

The resources offered by England Hockey to its members include:

(i) a club accreditation scheme that recognizes the club in question as a safe, effective and child friendly hockey environment;

(ii) a newsletter;

(iii) courses for coaches, umpires, teachers and young persons;

(iv) a network of county "hockey development offices";

(v) facilities for accessing government and lottery funding;

(vi) advice on developing the image of hockey, marketing it and obtaining sponsorship;

(vii) club management services and insurance for clubs;

(viii) competitions for teams of all ages;

(ix) club management packs covering employment and child welfare;

(x) access to the rules of hockey and

(xi) means of access to the Criminal Records Bureau.

Both clubs comprising Canterbury Hockey became affiliate members of England Hockey for the year 2002/3 and thereafter.

The invoices issued by England Hockey to Canterbury Hockey Club charge £165 for each of its ten teams (£1,650) plus VAT of £288.75. The invoices issue to Canterbury Ladies Hockey Club charge £165 for each of the five teams (£825) plus VAT of £144.38.

The Law

Article 13A.1 of the EC Sixth Directive directs Member States to "exempt the following under conditions which they shall lay down for the purpose of ensuring the correct and straightforward application of such exemptions and of preventing any possible evasion, avoidance or abuse:

"(m) certain services closely linked to sport or physical education supplied by non-profit making organizations to persons taking part in sport or physical education."

That provision was implemented in the UK, with effect from 1 June 1996, in Schedule 9 of the VAT Act 1994, at Group 10, which includes at item 3:

"The supply by an eligible body to an individual, except, where the body operates a membership scheme, an individual who is not a member, of services closely linked with and essential to sport or physical education in which the individual is involved."

Section 94(2) of VAT Act 1994 ("VAT Act") provides:

"Without prejudice to the generality of anything else in this Act, the following are deemed to be the carrying on of a business-

(a) the provision by a club, association or organization (for a subscription or other consideration) of the facilities or advantages available to its members …"

Conclusions

The two related questions arising from paragraph 1(m) of Article 13A on which the parties have joined issue are these. First, can Canterbury Hockey properly be described as a person "taking part in sport". The Commissioners say no; Canterbury Hockey, they say, is an unincorporated association and, as such, a person liable to VAT, but like an incorporated company, it can not and does not participate in sport. The response for Canterbury Hockey is that it, just as much as its members, does participate in sport. The second is whether it is legitimate to treat Canterbury Hockey as "transparent" and look through it to its individual members and on that basis regard England Hockey's supplies as made to persons taking part in sport.

Before addressing those questions, which essentially comprise the arguments put forward by both parties, we need to make some preparatory points.

It is not in dispute that paragraph 1(m) has direct effect. Its wording is unconditional and sufficiently precise. Canterbury Hockey is therefore entitled to rely on its provisions even if paragraph 1(m) has not been correctly implemented by item 3 of Group 10 to Schedule 9.

The approach to the interpretation of paragraph 1(m) must be purposive and we must be satisfied, without placing any strain on the words used, that the supplies fall fairly within the words of exemption: see Customs and Excise Commissioners v Electronic Data Systems Ltd [2003] STC 688 at paragraphs 18-23. In this connection we note that the words of paragraph 1(m) characterize the supplies by imposing two conditions. The first is satisfied. It is not in issue that the services of England Hockey are closely linked to sport and are supplied by a non-profit making organization. The second condition lies in the nature of the person to whom the supplies are provided.

The supplies in question, those of England Hockey, are club-related rather than player-related. We refer to the summary in paragraph 6 above of the resources offered by England Hockey. These are designed to enable the affiliated clubs to provide and facilitate the participation in the sport by their individual members. England Hockey's supplies do not, directly at least, provide the players with the means of playing hockey. When paragraph 1(m) refers to "the persons taking part in sport" as the person to whom the services are supplied, it must we think be referring to the individual players. We have been shown eleven language versions of paragraph 1(m). Our impression (and it can be no more than that) is that individuals who take part in or practice the sport in question or physical education are the intended objects of the supply and of the consequential exemption from tax. With those points in mind, we think that the words of paragraph 1(m) clearly states its purpose. We move on to ask whether England Hockey's supplies are made to individual playing members of the two component clubs.

That each of the two clubs composing Canterbury Hockey is a person in the sense that that term is used in paragraph 1(m) is, we think, established by the decision of the House of Lords in Eastbourne Town Radio Cars v Customs and Excise Commissioners [2001] STC 606. The Eastbourne decision does not completely resolve the present issue. It was based on the domestic VAT provisions and it does not as we read it answer the question whether England Hockey's supplies can fairly be described as made "to" the individual members of Canterbury Hockey who take part in the sport of hockey. The Eastbourne decision was concerned with a non-profit making cab drivers' association that had been set up to enable its members to employ office staff and to enable office and communications facilities to be supplied to the members who paid contributions to cover the expenses of the association. The question for the House of Lords was whether the association was making supplies to its members such that those supplies were chargeable to VAT as being taxable supplies "made by a taxable person in the course or furtherance of a business which it carries on": see the words of section 4(2) of VAT Act. Section 94(2)(a) of VAT Act, set out above, was recognized by the House of Lords as the key provision in the enquiry. It states that the provision by a club or association of facilities available to its members is "deemed to be the carrying on of a business" and, as Lord Hoffman commented in paragraph 30, those two provisions assume that the provision of such facilities "… can amount to a taxable supply by a taxable person.". It follows that Canterbury Hockey, as a deemed taxable person, makes supplies to its members and these would be taxable supplies but for the fact that they are admittedly exempt. It follows also that England Hockey, as a deemed taxable person, makes supplies (the recipient of which is in dispute).

But while the Eastbourne decision tells us that England Hockey and Canterbury Hockey may be taxable persons for purposes of the United Kingdom VAT code by virtue of the specific and limited deeming effect of section 94(2)(a), it does not bear on the question whether, for purposes of paragraph 1(m), England Hockey's supplies are "to persons taking part in sport". Canterbury Hockey contracts and pays for the supplies. The supplies in question are, as already observed, club-related rather that player-related. But Canterbury Hockey is an unincorporated association. It has no legal existence apart from the members of which it is composed. Lord Hoffman observed in paragraph 32 of the Eastbourne decision that such an association is not a legal entity. Instead it is a number of legal persons having mutual rights and duties in accordance with the rules which constitute the contract under which they have agreed to be associated, and the property of the association is owned by or on trust for the individual members and subject to the rules. Thus, in determining whether England Hockey's supplies are to persons taking part in sport, the use of those supplies by Canterbury Hockey's members, the proprietors of those supplies, determines the matter. Those members have clubbed together to obtain, pay for and use England Hockey's supplies in conformity with the rules of the component clubs. As a matter of ordinary use of language, Canterbury Hockey's members are persons taking part in hockey to whom England Hockey's supplies are made. Nothing in either the Sixth Directive or the domestic provisions displaces this.

We see no inconsistency in accepting the Eastbourne conclusion that Canterbury Hockey is a deemed taxable person (or would be if it made if it made taxable supplies) and at the same time characterizing those supplies as what they actually are, namely supplies to persons (i.e. the Canterbury Hockey' members) taking part in hockey. That characterization is, we think, squarely in line with the purpose of Article 13A.1(m). The answer might, we concede, be different if Canterbury Hockey were a legal person in its own right.

Reverting to the questions at issue between the parties, we think that Canterbury Hockey, as the associations of hockey-playing individuals who have clubbed together, can be described as taking part in sport; and, because both component clubs are unincorporated associations, the right approach is to look through Canterbury Hockey to those individual members. The supplies made by England Hockey are therefore within paragraph 1(m) and consequently are exempt. The words of item 3 of Group 10 in Schedule 9 of the VAT Act can, we think, be read consistently with that conclusion.

For those reasons we allow the appeal.

STEPHEN OLIVER QC

CHAIRMAN

RELEASED: 30 June 2005

LON/04/823