Longridge on Thames: Court of Appeal ruling that charity was involved in a business activity
There has been a significant VAT case for the charity sector concerning Longridge on the Thames, a charity which seeks to make water sports available to young
Longridge built a new training centre and sought to have the construction zero rated as a building to be used by a charity “otherwise than in the course or furtherance of a business”. Longridge would charge for certain uses of its centre such as corporate events, stag & hen parties etc. It ploughed the profits from these events into its charitable objects of educating young people in waterborne activities.
HMRC took the view that Longridge was in business and could not therefore benefit from zero rating on the construction work. Longridge appealed this decision and initially was successful in both the First Tier Tribunal and the Upper Tribunal but has now lost in the Court of Appeal.
Longridge had argued that its predominant concern was providing access to the activity and not with making supplies for consideration. The Court of Appeal ruled however that carrying out an activity for remuneration was a business activity and thus Longridge failed the test for zero rating on its new centre.
In practice HMRC have sought to apply this approach for some while and to limit the impact of previous cases where taxpayers were successful in mounting an argument that their activities are non-business even though there is a charge. Charities who are looking to construct new buildings will need to consider the implications of the Longridge judgement. Because of the “change of use” rules it could also have a bearing on charities who have benefitted from zero rating on new buildings in the past 10 years.
Charities who claim the 5% VAT reduced rate for fuel and power should also review this in light of the Longridge judgement
If you have any queries concerning the impact of the Longridge judgement or about VAT in charities more generally, please contact Julie.firstname.lastname@example.org or your usual contact at Centurion