- HMRC ruled Offside in standard-rating a football charity
In Northern Ireland, the Greenisland Football Club created a new clubhouse for all-purpose local community use. The non-profit Club covers sports other than football and it is not VAT-registered. It is also a registered charity (under the Charity Commission for Northern Ireland).
The work began in 2010 and at the outset, Greenisland Club gave the chosen building firm a written certification that the new building was to be used only for a ‘relevant charitable purpose’ and that building services should be zero rated.
After completion of the new clubhouse, an HMRC review of the project concluded that the builders’ invoices should have been subject to standard rate VAT.
Greenisland Football Club appealed this decision at the First-tier Tribunal, which upheld its appeal.
The Tribunal’s finding was that several community organisations used the Clubhouse extensively, and they were given equal preference to the football club’s own requirements. It was akin to a village hall in the way that it operated. It was not like a business. All surpluses went towards maintain the facility.
The Club had acted correctly by certifying that the works should be zero rated.
2. Nestlé shaken up by HMRC treatment
It has long been a grey area as to what constitutes a basic foodstuff and thus qualifies for zero rating, and what are confectionery or other comestible items, which should be standard rated.
This case at the First-tier Tribunal centred on whether there should be the same or different treatments between Nesquik chocolate-flavour milkshake powder (zero rated) and the strawberry and banana flavours (standard rated).
Nestlé’s case was that the fruity flavours ought to also be zero rated, stating that the products encourage the drinking of milk, which itself has a zero rating. Furthermore (the company said) the products were basically the same and thus must be treated equally, otherwise there was a breach of fiscal neutrality. Nestlé claimed for £4 million in VAT that it had paid on the fruit flavoured Nesquiks.
It may seem strange that the chocolate flavour was given zero VAT status, but this is due to it having some (zero rated) cocoa content. Cocoa counts as a foodstuff.
The Tribunal found for HMRC and confirmed the standard rating for the fruit flavour shakes, classifying them as being ‘powders for the preparation of beverages’.
3. ‘Fractional interest’ vs. timeshare – exclusivity issues
This case was complicated, and it went to two levels of appeal.
It centres on the ways in which differing time-limited holiday accommodation are treated for VAT.
Where a right to occupy land exists, zero rating applies. However this does not extend to timeshare schemes, which are charged at the standard rate.
Marriott subsidiary, Fortyseven Park Street Ltd, (FSPL) offered buyers a ‘fractional interest’ in 49 exclusive apartments, for an advance sum of £92,000 – £243,000. The deal granted exclusive occupation lasting up to 21 days in every year up to 2050; as well as exchange possibilities to stay in other Marriott group properties. This of course is similar to a timeshare package, especially in the exchange aspect.
The HMRC Case:
This was the sale of a right to occupy accommodation, just as in a ‘hotel…or similar establishment’, and was therefore subject to the standard VAT rate.
The FSPL Case:
This was more than just occupation with access only if available: when in residence, their buyers had exclusive rights that precluded anyone else from having enjoyment of the property.
First-tier Tribunal ruling:
The finding was in favour of HMRC because the acquirers obtained only limited-period stays in the properties. The Tribunal did not focus on the issue of the type of right being acquired.
Upper Tribunal ruling:
The Tribunal found in favour of FSPL. It held that the company was offering more than a just an opportunity to enter and occupy an apartment if there was one free. This was an offer of an exclusive occupation right that lasted for a specified period. The right existed, even if the buyer did not use his or her residence opportunity. In this specific case, the company was letting immovable property, which is VAT-exempt.
Contact Loveth Watson on 0173808075 if you affected with any of the rulings or need VAT tax advice.