United Kingdom VAT & Duties Tribunals Decisions

Heating and Ventilating Contractors Association v Revenue & Customs [2008] UKVAT V20887 (3 December 2008)

20887

Trade Association - whether entitled to exemption from VAT on members subscriptions and other supplies under Art.132(1)(l) of the Consolidated Directive as a trade union or civic organisation or under Item 1 of Group 9 of Schedule 9 to VATA 1994. Held registrable. Appeal dismissed.

LONDON TRIBUNAL CENTRE

HEATING AND VENTILATING CONTRACTORS ASSOCIATION Appellant

and –

THE COMMISSIONERS FOR HER MAJESTY'S REVENUE & CUSTOMS Respondents

Tribunal: ELSIE GILLILAND (Chairman)

J G ROBINSON

Sitting in public in London on 6 and 7 October 2008

Eamon McNicholas, counsel, instructed by Armstrong Watson accountants Hexham, for the Appellant

Matthew Barnes, counsel, instructed by the General Counsel and Solicitor to Her Majesty's Revenue and Customs, for the Respondents

© CROWN COPYRIGHT 2008


 


DECISION

1. This was an appeal by the Heating and Ventilating Contractors Association (the Appellant) against a decision of H.M. Revenue and Customs (the Respondents) contained in a letter dated 7 September 2007 refusing the Appellant's application for repayment with interest of Value Added Tax (VAT) which had been paid by the Appellant in respect of the subscriptions paid by the members of the Appellant to the Appellant since its registration for VAT in 1973 and also for repayment of VAT paid by the Appellant on other supplies it had made to third parties and to its members.
2. In its Grounds of Appeal the Appellant set out 7 distinct grounds of appeal. By a Direction dated 25 June 2008 it was directed that this hearing should deal only with grounds 1, 2, 4 and 6. It has however now been agreed between the parties that ground 6 should not be dealt with and should be stood over. This hearing is thus concerned only with grounds 1, 2, and 4 which raise the issue of principle, namely whether the Appellant was properly chargeable to VAT in respect of the subscriptions and other sums paid by its members and its supplies to non members since 1978. The issues of unjust enrichment, whether the Appellant's claim is time barred or capped, interest, and the position of supplies to non-members between 1973 and 1978 only arise if the Appellant is successful in its claim that it was not in principle liable to VAT on members subscriptions and on supplies to non members. The effect of the agreement between the parties is that the tribunal has only been concerned with the liability of the Appellant to pay VAT for the 3 years before the Appellant made its claim for repayment in 2006. The other issues raised by the Notice of Appeal have been stood over pending a decision on the issue of principle.
3. Ground 1 set out in the Grounds of Appeal is that the Appellant is a body falling within Article 132(1)(l) of the Consolidated VAT Directive 2006/112/EC (the Consolidated Directive). The Consolidated Directive provides in Article 132 (1) (l) that member states shall exempt "the supply of services and the supply of goods closely linked thereto to their members in their common interest 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". This wording closely follows that contained in Article 13 A (l) of EC Council Directive 77/388 (the Sixth Directive) which provided that member states "shall 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… (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…". Article 131 of the Consolidated Directive contains provisions equivalent to the opening words of Article 13 A of the Sixth Directive restricting the exemption under conditions laid down by the member state for the purposes of the ensuring the correct and straightforward application of the exemptions and to prevent evasion, avoidance, or abuse. It is to be noted that the aims of the types of organisations which are to be exempted from VAT under both the Sixth Directive and the Consolidated Directive are the same and that those organisations must also be non-profit making in nature and are described as organisations which supply goods and services to their members in return for a subscription fixed in accordance with the rules of the organisation. There is no dispute that the Appellant satisfies the requirements of being a non- profit making organisation nor that any supplies are made to its members in return for a subscription fixed by the rules of the Appellant.
4. The first issue which has been argued before the tribunal is whether or not the Appellant falls within the class of organisation which is entitled to exemption under Article 132(1)(l) of the Consolidated Directive. It has not been suggested that there is any material difference in this regard between the provisions in the Sixth Directive and those in Article 132(1)(l) of the Consolidated Directive.
5. Ground 2 set out in the Grounds of Appeal is that as the Appellant falls within Article 132 (l(l) of the Consolidated Directive, it is accordingly exempt from VAT under the relevant UK legislation which is currently to be found in Schedule 9 Group 9 of the Value Added Tax Act 1994 (the Act). Mr. McNicholas for the Appellant has submitted that the UK legislation has failed properly to implement Article 132 (1)(l) in that (1) it is impermissible to restrict the concept of a trade union to employment and domestic legislation within Group 9 item 1(a), (2) it is impermissible to seek to limit the European concept of a trade union to individuals in a profession as in item 1(b), (3) there is no primary purpose element in European law as appears in items (c) and (d) and (4) there is no restriction in European law to bodies with objects in the public domain as appears in item (e.) Under this second ground of appeal, it is also claimed that the Appellant is entitled to exemption from 1 January 1978 under European law and not just from 3 September 1978 as provided by the UK legislation. Ground 4 relates to supplies made by the Appellant to third parties and exemption is claimed on the basis that those supplies are ancillary to the Appellant's aims within Article 132(1)(l) of the Consolidated Directive.
6. The Appellant is an unincorporated association. Membership of the Appellant is under Rule 5 of its constitution open to persons partnerships and companies engaged in the installation and/or maintenance and/or commissioning of plant and equipment for heating and/or ventilating and/or refrigeration and/or air conditioning and/or piping and/or domestic engineering and/ or energy management systems, and which comply with the Appellant's inspection and assessment regime as laid down from time to time by the Appellant's managing and executive body known as the Council. The Appellant as its name suggests is a trade association for contractors in the construction industry who are engaged in carrying out heating and ventilation and similar work.
7. The Appellant can trace its history back to 1904 when an employers association called the National Association of Master Heating and Domestic Engineers was founded by some 14 original members. The Appellant now has 1445 members consisting of both large and small companies. It was the evidence of Mr. Robert John Higgs (Mr. Higgs) which we accept that the Appellant's members now account for some 85% of the turnover in the United Kingdom of the heating and ventilating and associated industries. The Appellant is a representative association and each member is entitled to one vote at general meetings. The Appellant is organised on a regional basis and at present it has 11 regions covering England, Scotland, Wales and Northern Ireland. There are also specialist groupings open to members consisting of the ductwork group, the heating and plumbing services group, the refrigeration and air conditioning group, the service and facilities group and the national contractors group. The Appellant's affairs are under the control of its Council which consists of 4 officers, 6 elected representatives and representatives from the regions and the specialist groups as well as up to 4 co-opted members, the chairmen of the standing committees mentioned in Rule 41 and the chief negotiators for the Operative Agreement and the Staff Salary Agreement. Under Rule 41 provision is made for the Operative Standing Committee and the Staff Standing Committee to make representations to the Council respectively on matters concerning the regulation of relations between employers and manual workers (or their representative organisations) and the relations between employers and staff (or their representative organisations) and to negotiate agreements with organisations of manual or staff employees respectively. Rule 44 of the Appellant's Rules makes provision for the appointment of a chief executive.
8. Mr. Higgs has been the chief executive of the Appellant since 1989. Under Rule 44 the chief executive has, subject only to directions of the Council or of a committee of Council, the power to exercise all the powers of the Appellant in relation to the appointment and removal of the Appellant's staff and to determine the terms and conditions of their employment. It is however clear from the evidence given by Mr. Higgs that his functions and responsibilities as chief executive in fact extend well beyond dealing with the Appellant's staff. His evidence, which was not challenged and which we accept, was that he is responsible to the Appellant's Council for the overall management of the operations which it undertakes for the benefit of its members. Mr Higgs said that he had been awarded an O.B.E. 2 years earlier and that it had been awarded for his services to the construction industry and to the environment. The reference to the environment, he explained, was a reference to his work on behalf of the Appellant with the European Union and the UK government on a range of environmental matters concerning heating and ventilation and the management and safe handling of for instance fluoridated gases.
9. In his evidence Mr. Higgs went on to describe the Appellant's activities. He referred to the Appellant preparing for the "next round of negotiations with the trade union" in respect of the national Operative Wage Agreement beyond 2009 as well as dealing with the implementation of a recent agreement regarding student engineer salaries. There were also discussions with other trade associations regarding a strategic review of the existing agreement relating to staff salaries. The Appellant also was continuing its commitment to education and training within the industry and was developing plans for a potential statutory training fund to which all employers in the sector would contribute and which would support those who actively train apprentices for others. This was, he said, in addition to the current range of training courses to meet the requirements of members and for which the Appellant was seeking external accreditation. Under the Rules of the Appellant, every member of the Appellant is bound to pay a training levy which is payable into a training fund which is to be used for the sole purpose of training and separately accounted for in the Appellant's accounting records.
10. The Appellant, Mr. Higgs said, also lobbies the government and other organisations. It is at present in discussions with the Department for Business, Enterprise and Regulatory Reform over amendments to the Housing Grants and Regeneration Act 1996 (the 1996 Act) in relation to construction contracts and is concerned in a review of construction which the government has initiated. The Appellant has made detailed submissions to the Health and Safety Executive in relation to the CORGI registration scheme for gas installers. It was also Mr. Higgs's evidence that the Appellant's specialist groups were active in relation to the creation of standards as well as in more general areas and he referred to the creation of a Partners in Excellence Agreement with another association by the Ductwork group and the involvement of the Refrigeration and Air Conditioning group with European bodies over the introduction of regulations for the safe handling of refrigerants resulting in the engagement of the Appellant with DEFRA over the implementation of a registration scheme in the UK. The Appellant was also with other trade associations a founder member of the Specialist Engineering Contractors Group which was heavily involved with the Latham Review which gave rise to the 1996 Act introducing provisions for adjudication and other terms in construction contracts intended to assist parties to construction contracts to receive payment due speedily and for any disputes to be resolved on a provisional basis by an adjudicator with resort subsequently to the courts or to arbitration if the provisional decision of the adjudicator were not accepted. It was also Mr. Higgs's evidence that having joined with the Committee of Associations of Specialist Engineering Contractors, a seat has been obtained on the Joint Contracts Tribunal. The Joint Contracts Tribunal drafts and publishes the standard forms of contract for the construction industry and representation of the views of the Appellant on such a body, we are satisfied, could well be of advantage to the members of the Appellant and to other contractors in the construction industry both generally and in fields covered by the Appellant.
11. In his oral evidence, Mr. Higgs explained that the Appellant had been involved with revisions to the Building Regulations and had been in discussions with the Department for Communities and Local Government in relation to energy efficiency matters and the leakage of air from ductwork as well as the writing of standards for energy efficiency. Thus L2A, an approved document under the Building Regulations and which came into force on 6 April 2006, refers at paragraph 48 to one way of limiting air leakage from ventilation ductwork as being to comply with the Appellant's specifications given in HVCA DW/144 which was published by the Appellant in 1998.
12. Mr. Barnes for the Respondents did not challenge any of the factual evidence given by Mr. Higgs and we accept Mr. Higgs's evidence. Reference was also made at the hearing to the contents of the Appellant's web site, to the Appellant's strategic plan for 2007-2010, the Appellant's Annual Reports and to a series of Key Issue documents produced by the Appellant. Mr. Higgs accepted in cross-examination that these documents together with the Appellant's Rules were a fair representation of what the Appellant was seeking to achieve. We are satisfied and find that these documents fairly reflect the activities carried out by the Appellant.
13. As a trade association the Appellant provides a wide range of services to its members such as the provision of advice on contractual disputes, the interpretation of documents and on the implications of new, revised and existing legislation. It advises members on employment issues including dismissal, disciplinary matters, recruitment, equal opportunities, sickness, absence control and also on the requirements of the Revenue's Construction Industry Scheme. It seeks to keep members informed and up-to-date on developments affecting the industry generally. It also provides advice and assistance on health and safety matters. Advice is provided on technical issues relating to building engineering services and the construction sector generally, such as, for example, in relation to the requirements of the Building Regulations, British and European Standards, advice on environmental issues and new technologies as well as on matters of sustainability. It also publishes guides and specifications for the various areas of work carried out by its members in the heating and ventilation industry. In addition to providing specific services to particular members requiring advice or assistance, the Appellant also has a more public function. It consults and makes representations at both national and European level on changes to the law affecting the heating and ventilation industry. It seeks to improve standards in the heating and ventilating industry through its inspection and assessment regime, compliance with which is now a requirement for membership of the Appellant. The Appellant also supports training schemes and imposes a training levy on its members. Members are entitled to refer to their membership of the Appellant on their letter heading and to promote their business on the basis that they are reputable traders being members of an appropriate trade body which supports proper standards of work. Further the Appellant is engaged in negotiations with trades unions on terms and conditions of employment.
14. In its Strategic Plan for 2007-2010 the Appellant sets out its mission as follows: "The HVCA adds value to members' businesses by providing quality services, promoting excellence and shaping the commercial environment through representation and leadership". The strategic plan identified 4 core strategic objectives. These are: 1 to improve the commercial environment in which its members operate; 2 to equip its members to operate efficiently and profitably; 3 to improve professional standards throughout the industry and 4 to ensure and maintain a skills pool adequate for the short and long-term needs of the industry. The plan then sets out 6 key areas for action. These relate to skills, sustainability, industrial relations, profitability, competence and collaboration. The strategic plan is in our view a fair description of what the Appellant is seeking to achieve. It is also entirely consistent with what is stated to be the Appellant's principal object in Clause 5 of its Rules where it is provided: "The principal object of the Association is to represent, promote and safeguard the interests of its members and the business sectors in which they are engaged, relevant to the scope of the Association". In our view the emphasis both in the strategic plan and in the principal object is the promotion of the commercial interests of the members. In addition to setting out the principal object of the Appellant, Rule 5 goes on to provide that the objects of the association are also to do the various things which are then set out in the following 20 sub- paragraphs.
15. The 20 sub-paragraphs are as follows:

(a) Promote and maintain a high standard of workmanship and service in the Industry;

(b) Promote and further the interests of members generally and in particular to protect and defend those interests against any action conductor proceeding which tends to impose unduly restrictive conditions upon any branch of the Industry

(c) Secure mutual support and co-operation in dealing with demands made and actions or proceedings threatened or undertaken on all matters or questions affecting the common interests of the members

(d) Endeavour to settle differences which may arise amongst members and to promote wider and more friendly intercourse between persons engaged in any branch of the Industry

(e) Secure the equitable carrying out of agreements made with other associations or persons

(f) Circulate amongst the members information on matters relating to any branch of the Industry or any trade or interest connected therewith

(g) Promote support or oppose and to watch over legislation and other measures which may affect or tend to affect the interests of the industry

(h) Give members such legal or other assistance as shall appear proper or desirable to the Association

(i) Regulate relations between employers and workers or organisations of workers in the Industry

(j) Take such action as may be necessary or desirable for avoiding industrial disputes

(k) Negotiate with the appropriate trade union or trade unions the wages salaries and conditions of employment appertaining to persons employed or otherwise connected with the Industry

(l) Investigate and adjust or make provision for the settlement of any question arising between any member or members and their workmen which may be referred to or come within the jurisdiction of the Association

(m) Raise funds to further the objects of the Association

(n) Act jointly by federation amalgamation or otherwise and to co-operate with any other Association or Federation in furtherance of the objects of the Association

(o) Do all such other lawful things as are in the opinion of the Association incidental or conducive to the attainment of the above objects or any of them

(p) Adopt any course of action which may from time to time be deemed desirable in the interests of the Association

(q) Institute any scheme or schemes whereby members are required to guarantee their materials and workmanship etc. and to underwrite any such scheme so that the Association will accept defined responsibility if a member defaults in his obligations

(r) Institute or join with others in instituting any scheme or schemes to provide pensions and/or life assurance for persons employed or otherwise connected with the Industry and to enter into guarantees in connection with the establishment of any such schemes or otherwise to

underwrite the same

(s) Promote and support training schemes for persons including apprentices employed or otherwise connected with the industry

(t) Promote and support any limited company or companies which the Council shall appoint to pursue all or any of the objects of the Association or assist the Association in its activities.

16. In addition to the objects set in Rule 5, Rule 5A which also appears under the same cross-heading of "Objects" confers an express power for the Appellant at its discretion to provide services to an affiliated body which is defined as an organisation having common interests with the Appellant but which did not qualify for membership of the Appellant.
17. Mr. McNicholas for the Appellant submitted first that the Appellant is a non profit-making organisation with aims falling within Art.132(1)(l) of the Consolidated Directive and in particular that the aims were of a trade union or civic nature. He referred also to a passage appearing in Terra & Kajus A Guide to the European VAT Directives (old loose leaf version) Ch.X p.74.1- 76. This contains a quotation from the commentary to the first report of the EC Commission on what was to become the Sixth Directive. It is as follows:

"…these organisations are in fact acting as the collective voice of their members and the subscriptions paid by the latter are for membership of a collective organisation and do not represent a consideration for services rendered. Such organisations should therefore fall outside the scope of VAT".

18. Mr. McNicholas, in reliance on this passage, then submitted that the basis for the exemption from VAT of the bodies set out in what is now Art.132 (1) (l) was that there was no supply for VAT purposes in a collective organisation, although being for the public good it had been specifically exempted to make the matter clear. There are 2 difficulties with this submission. First the Appellant cannot, in our view, be said to be an organisation which does not make supplies to its members. It clearly does make supplies to its members in so far as it provides advisory services and inspects and assesses its members or organises training schemes. The Appellant is not an organisation like the Apple & Pear Development Association where it can be said that there was no relationship between the benefits received by its members and the levy. See Apple & Pear Development Council v Customs C-102/96 ECJ [1998] STC 221. There is a clear relationship between the annual subscription which is based on the amounts of wages paid and turnover of the members and the services they receive from the Appellant. The subscription also includes a fee for the "inspection and assessment regime" which the Appellant carries out of its members. See Rule 76. Secondly we do not consider that the Appellant is a collective organisation in the sense in which that term is used in Terra & Kajus.
19. In the passage quoted from Terra & Kajus the reference to a collective organisation is to an organisation which acts as the collective voice of its members. The Appellant in our view is more than just the collective voice of its members. No doubt it may act as a collective or representative voice of its members on some occasions, as for example if it has consulted its members and makes representations on proposed legislation or regulations or other matters of common interest or when negotiating with other organisations or trade unions on wages or terms and conditions of employment but it is in our view clear that, as its principal object states, the aims of the Appellant go well beyond merely representing the views of its members or acting as their collective voice. The aims extend to the promotion and safeguarding the interests generally of the members or as it is expressed in its strategic plan it adds value to its members' businesses by providing quality services, promoting excellence and shaping the commercial environment through leadership as well as through representation.
20. The Appellant cannot be said to be a political or a religious, patriotic, philosophical or philanthropic organisation. If it is to fall within Art. 132 (1) (l), it can only be as a trade union or as a civic organisation. The question of what is a civic organisation for VAT purposes was considered by the Court of Appeal in The Expert Witness Institute v Commissioners of Customs and Excise [2001] EWCA Civ 1882. It was there held that the Expert Witness Institute was entitled to exemption as a non-profit making institution with aims of a civic nature. The object of the Institute was to support the proper administration of justice and the early resolution of disputes through fair and unbiased expert evidence and in particular by providing support and training for experts; by acting as a voice for expert witnesses and encouraging the use of experts; and by making representations to the government and other authorities and professional bodies; and by working actively with other professional bodies to ensure that their members wishing to be expert witnesses had the necessary training education support and ability. At paragraph 27 of his judgment Chadwick LJ said:

"For my part, I would reject the submission that the phrase "aims of a civic nature" - or the equivalent phrase "objects which are of … a civic nature" which is found in the domestic legislation - must be given a meaning which excludes aims or objects pertaining to citizenship nationwide. There is nothing in paragraph (l) of article 13A (1) of the Sixth Directive which suggests that civic is to have - or to have only - a municipal connotation. None of the other descriptive epithets in that paragraph - political, trade-union, religious, patriotic, philosophical and philanthropic - have that connotation. The same may be said both of paragraph (e) of item 1 of Group 9 in Schedule 9 to the 1994 Act and of the other paragraphs of that item. It is 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. There is no reason that I can ascertain why the phrase should not be given that meaning in the context of paragraph (l) of Article 13A (1). If so, the comparable phrase "objects which are of a civic nature" in paragraph (e) of item 1 of Group 9 in Schedule 9 to the 1994 Act must bear the same meaning." Longmore L.J. at paragraph 35 said that the primary meaning of civic in the context of VAT was "of, pertaining or proper to citizens". Harrison J. agreed. The Court of Appeal also held that the proper administration of justice and the early resolution of disputes through fair and unbiased expert evidence was an aim of a civic nature giving "civic" the meaning "of pertaining or proper to citizens" or "of or pertaining to citizenship" on the basis that a proper administration of justice was a central element in the social contract between the state and its citizens and that the provision of fair and unbiased evidence promoted justice.

21. Although paragraphs (d) and (j) and possibly paragraph (l) of Rule 5 of the Appellant's rules may be said to have a connection with the fair resolution of disputes, there is it seems to us a basic difference between the objects of the Appellant and those of the Expert Witness Institute. The essential object of the latter in our view was to support the proper administration of justice whereas the principal object of the Appellant is the representation, promotion and safeguarding of the interests of its members and the business sectors in which they are engaged. This in our view is an aim of an essentially private nature without any real connection with citizenship nor does it pertain to citizens whereas the administration of justice as the Court of Appeal pointed out is part of the obligations existing between the state and its citizens. The only connection between the Appellant and citizens or citizenship, it appears to us, is that its individual members are citizens but that cannot be sufficient to convert the Appellant's aims into aims of a civic nature. It is the aims of the Appellant which have to be considered, not the membership of the Appellant. We hold that the aims of the Appellant cannot properly be said to be of a civic nature within the meaning of Art. 132 (1) (l) of the Consolidated Directive.
22. The next question is whether the Appellant is a trade-union within the meaning of Art. 132(1) (l) of the Consolidated Directive. The meaning of the equivalent wording in the Sixth Directive was considered by the European Court in Institute of the Motor Industry v Customs and Excise Commissioners [1998] STC 1219. After observing that it was to be borne in mind that the terms of the exemption were to be interpreted strictly since they constitute exemptions to the general principle that turnover tax is levied on all services supplied for a consideration by a taxable person (Stichting Uitvoering Financiele Acties v Staatsscretaris van Financien [1989] ECR 1737 at 1753 para. 13) and that the aim of Art.13A of the Sixth Directive was to exempt from VAT activities which were in the public interest but that not every activity performed in the public interest was entitled to exemption, only those which were listed and described, the European Court at paragraphs 19, 20 21 and 23 of its judgment stated:

19. "In the light of these 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 the objects of a trade union within the meaning of Article 13(A)(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 professions or traders carrying on a particular economic activity- and to represent them vis-à-vis the appropriate third parties including 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.13(A)(l) of the Sixth Directive in so far as it provides its members with a representative voice and strength in negotiations with third parties.

23. The answer to the Tribunal's question must therefore be that for the purposes of art.13A(1)(l) of the Sixth Directive , an organisation with aims of a trade-union nature means an organisation whose main aim 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."

23. While clearly some of the activities and objects of the Appellant can be said to be in the public interest in general terms - for instance the activities of the Appellant in promoting good standards of workmanship and training, the avoidance of industrial disputes and the institution of schemes for guaranteeing materials and workmanship and the underwriting of such schemes - that is not sufficient in our view to entitle the Appellant to exemption as a trade union under Art. 132(1)(l). To be entitled to exemption the Appellant must as the European Court at paragraphs 21 and 23 of its judgment stated have as its main object the defence and representation of the collective interests of its members vis-à-vis third parties. Rules 5 (i) and (k) would clearly fall within the activities of a trade union within Article 132(1)(l) as probably would Rules 5 (b) (c) and (g) but these are only some of the objects of the Appellant. Rules 5 (a) (d) (f) (h) (n) (q) and (s) however are also significant elements in the Appellant's aims and activities. The principal object of the Association as stated in Rule 5 in our view goes well beyond defending the collective interests of the Association's members and representing them vis-à-vis third parties. It extends to the promotion and safeguarding of the interests generally of its members as well as the business sectors in which they are engaged. Further, Rule 5A by its terms extends well beyond the representation of the collective interests of the members of the Association and gives a general power to provide services on such terms as may be agreed to affiliated bodies which are not members. The only limitation on who may be an affiliated body is that it should have a common interest with the Association. None of the evidence which we have heard establishes that the main aim or aims of the Appellant are limited or restricted to the defence and representation of the collective interests of its members. They are only some of the aims of the Appellant. The Appellant's mission as stated in its strategic plan is to add value to members' businesses by the provision of quality services to its members, promoting excellence and shaping the commercial environment. This is entirely consistent with the evidence of Mr. Higgs and with the main object of the Appellant as set out in Rule 5 which includes the promotion of member's interests generally. This goes well beyond representing the members and defending their interests vis-à-vis third parties.
24. In his submissions Mr. McNicholas submitted that one aim may shade into another aim with the consequence that together those aims may constitute a main aim. While we would not interpret Article 132(1) (l) as preventing a series of aims as amounting to a main aim for the purpose of paras. 19, 20, 21 and 23 of the judgment of the European Court in the Institute of the Motor Industry case, nevertheless those aims, considered together, must still amount to the main aim or object of the Appellant. The difficulty which the Appellant has in our view failed to overcome is in showing that those aims or objects amount to the main object or aim of defending and representing the collective interests of its members vis-à-vis the relevant decision makers. The promotion of the interests of the members generally does not entitle the Appellant to exemption under art.132(l). It is only if those interests are promoted in the particular way stated by the European Court and where there may be more than one aim that such aims amount to the main aim of the organisation.
25. It is for the Appellant to establish that it is entitled to exemption under Article 132(1)(l) of the Consolidated Directive since it is seeking to claim an exemption from the general principle that VAT is chargeable on all supplies of services (Stichting Uitvoering Financiele Acties [1989]ECR 1753 para.13). Although evidence was given by Mr. Raymond John Barraclough FCA, the financial director of the Appellant, there was nothing in his evidence to show that the expenditure of the Appellant was principally directed to only some of the objects of the Appellant and there was nothing in his evidence or in that of Mr. Higgs which would enable the Tribunal to find that the principal object of the Appellant was restricted to that of a collective organisation whose main aim was to defend the collective interests of its members and to represent them vis-a-vis third parties. The Appellant in our view has not established that it is entitled to exemption from VAT under the terms of the Consolidated Directive.
26. In view of our conclusion in relation to Article 132(1)(l) of the Consolidated Directive, the submissions made by Mr. McNicholas in relation to whether Group 9 correctly incorporates the Consolidated Directive into domestic law do not strictly arise since his submissions were predicated on the basis that the Appellant was entitled to exemption under Article 132(1)(l). However we are satisfied and hold that the Appellant is not entitled to exemption under Group 9 of Schedule 9 to the Act. For the sake of completeness we shall deal briefly with the submissions which Mr. McNicholas has made in relation to Group 9 in Schedule 9 to the Act
27. First, we accept (and this was not disputed by Mr. Barnes) that the restricted definition of trade union in para.(a) referring to an organisation having as its main object the negotiation on behalf of its members of the terms and conditions of their employment is more restricted than the meaning of trade union in Article 132(1)(l) of the Consolidated Directive. The meaning of the term was clarified by the European Court in the Institute of the Motor Industry case [1998]STC 1219 to which we have already referred but for the reasons we have given in relation to Article 132(1)(l), we find that the Appellant, although its members are employers and are engaged in a trade, does not fall within the wider meaning of trade union as interpreted by the European Court.
28. Para.(b) of Group 9 restricts exemption to "professional organisations". This is in our view too restrictive since the European Court has clearly held in the Institute of the Motor industry case that the exemption does extend to the defence and representation of the collective interests of traders as well as those of workers and employers and independent professions. The members of the Appellant would not in our view as a matter of ordinary language be properly described as being members of a profession and as such are not within the meaning of a professional association as that term is used in domestic law. See Carr v IRC [1944] 2 All E R 163, 166. While it is a matter of degree the members of the Appellant are more properly described in our view as traders or contractors. However even if profession or professional were to be given a wider interpretation as extending to include traders or contractors, it cannot in our opinion be said that the membership of the Appellant is wholly or mainly restricted to individuals who have or are seeking a qualification appropriate to working in the heating and ventilating industry. The evidence of Mr. Higgs is that the membership of the Appellant consists of large and small companies. No doubt there may be some individual members but there is no evidence that membership is wholly or mainly restricted to individuals. It is not clear how companies can be said to have or to be seeking a qualification appropriate to the practice of the trade in question. Further, although the Appellant operates a validation scheme, no qualification appears to be awarded and its members whether corporate or not do not appear to have any particular qualification. Para. (b) even if interpreted as extending to include traders or contractors does not in our view assist the Appellant.
29. The restrictions in paras. (c) and (d) limiting the organisations entitled to exemption to those whose "primary purpose" is the purpose stated in our view incorporates into domestic law the requirement which appears in the judgment of the European Court in the Institute of the Motor Industry case that the object or aim in question must be the main object or aim of the organisation. In that case what was being considered in principle was the meaning of a trade union for the purposes of the Sixth Directive. It was held to include, among other organisations a professional association. The requirement that the aim must be the main aim must, it seems to us, apply to all the different types of association which fall within the wider meaning of trade union in European law. The requirement in paras. (c) and (d) of Item 1 of Group 9 for a primary purpose is justified and should be interpreted in the sense of main aim as stated by the European Court. The Appellant can fairly be said to have as one of its purposes the fostering of expertise connected with the heating and ventilating industry but it cannot in our view be said that that is its main purpose or its main aim. Likewise it is not the Appellant's main aim to make representations to the government on legislation and on other public matters which affect the business interests of its members. Again that is only one among other aims of the Appellant. Even taking the aims referred to in paras.(c) and (d) together, those aims or purposes do not appear to us to be the main aims or purposes of the Appellant. The provision of advice and assistance to individual members and assisting them to develop their businesses and to be profitable are in our view important aims and functions of the Appellant.
30. Finally Mr. McNicholas submitted that there was no requirement in Article 132(1)(l) that the objects of the association concerned must be in the public domain as stated in para.(e) but even if that were correct, that would not assist the Appellant since it is not, for the reasons we have already stated, a body of a civic nature or one of the other types of body mentioned. In any event it appears to us doubtful whether Mr. McNicholas is correct since the European Court having pointed out at para.18 of its judgment in the Institute of the Motor Industry case that the aim of Article 13A of the Sixth Directive was to exempt certain activities which were in the public interest went on to say that not every activity performed in the public interest was entitled to exemption. It is in our view clear from this passage that in order to claim exemption it is a pre-requisite that the activity concerned is in the public interest and had it been necessary we would have held that the reference in para. (e) to being in the "public domain" was to be interpreted as a reference to the body concerned being a body whose activities were in the public interest but again that does not assist the Appellant because it is not in our view one of the kinds of bodies specified in para(e) or in what is now Article 132(1)(l) of the Consolidated Directive.
31. Our conclusion is that the Appellant is not entitled to exemption from VAT. The issue of exemption in respect of any ancillary activities does not thus arise. The evidence however in relation to ancillary activities was limited and it was unclear precisely what these activities were. In a letter dated 29 May 2007 from Armstrong Watson on behalf of the Appellant the activities were categorised under 4 headings: publications, which were said to be mainly zero rated; service charges relating to work done for other organisations in negotiating with government departments on matters of common interest such as training schemes, health and safety provision, employment legislation and consultative exercises generally; miscellaneous income which was said to be "somewhat of a catch-all" and which was not further specified; and sundry costs recovery relating to the value of tickets and similar income from HVCA functions such as the annual dinner. Generally this income was said to come from members but some also came from third parties. At the hearing a schedule was produced (p. 129 of the Appellant's bundle) which showed (after correction by Mr. Barraclough) that in the years 2004, 2005 and 2006 the totals received were £79,151, £19,075 and £78,634 respectively. These figures compared with over £3,000,000 for subscription income in each of these 3 years. We are satisfied on the limited evidence before us that these various activities were a comparatively minor part of the Appellant's activities and may be said without straining language to be ancillary to its activities for its members. However in making supplies to third parties, the Appellant in our view is in principle liable for VAT on those supplies as it is in no different position from any other trader making chargeable supplies. The exemption is not to be used to distort competition and supplies to third parties, such as for example the provision of advice or negotiating services in return for a fee, would in principle place the Appellant at an advantage compared with other suppliers. However in any event since the Appellant is not entitled to exemption in respect of its subscription income, it cannot be entitled to exemption in respect of these additional activities unless as in the case of the supply of books they are exempt in their own right.
32. The appeal is dismissed. The Respondents have not sought a direction for costs and we make no direction.

ELSIE GILLILAND

CHAIRMAN

RELEASED: 3 December 2008

LON 2007/1777