Folded football stadium

Do new community buildings qualify as village halls for VAT?

Robert Warne, Partner, Head of VAT
Folded football stadium

The decision of the Upper Tribunal on Eynsham Cricket Club could open the doors to VAT relief for many new builds of sports, arts and other charities where a modest amount of community use takes place. It reaffirms that the construction of buildings can be zero-rated when the dominant purpose is to provide facilities for members or beneficiaries of a charity, and where the facility will be managed by the charity and not the community.

However, the decision confirms that a body registered only as a Community Amateur Sports Club (CASC) does not qualify to be treated as a charity for VAT purposes.

The decision

Eynsham Cricket Club is a CASC and not a charity; it had constructed a new pavilion which would be used not only for cricket-related activities, but by other sections of the local community.

The First Tier Tribunal held it was not entitled to have these works zero-rated. However, the Upper Tier Tribunal – which sets a legal precedent – went on to conclude that the works would have been zero-rated had the Club been registered as a charity. The new building was being used similarly to a village hall, even if the primary and dominant use, and the management of the facility was by the charity and not the community.

This sits well with existing court decisions, such as Caithness RFC, where HMRC were unsuccessful at the Court of Session (the Scottish court of appeal) in arguing that a building that was primarily driven by sports club use could not be treated in the same way as a village hall.

This decision is good news, not just for sports clubs but any charity that lets other local groups use its facilities; it confirms that these facilities need to be looked at in the round, and all uses of the building taken into account.

What does this mean for charities?

  • If you are a charity that has been denied zero-rating by HMRC on the grounds that your building is not community managed, or where your own use has priority, you may have an opportunity to argue that VAT has been over-charged (as long as there is community use).
  • Where you have been able to obtain zero-rating for a new building, but have been restricting the use only to your own charitable activities, there may be scope to widen your customer base.
  • We recommend you review the position as a matter of urgency.

What does this mean for non-charities?

  • If you are a CASC that is not a registered charity, and you have received services VAT-free, you or your supplier may be subject to an assessment from HMRC.
  • If you are planning to create a new building it may be worth the compliance burden of becoming a charity in order to obtain a VAT cost.

To discuss this further please contact Robert Warne or your usual VAT contact.

Contact us

Robert Warne
Rob Warne
Partner, Head of VAT and Customs Duty services