An agricultural society has won a First Tier Tribunal (FTT) appeal after a dispute with HMRC over a VAT rebate of £292,725 on admission fees, sponsorship income and advertising
The Yorkshire Agricultural Society, a charitable company that runs the annual Great Yorkshire Show, disputed an assessment of £90,776 in VAT payments for the period 12/17, and a refusal by HMRC to allow a net VAT repayment of £201,949, which the appellants argued should have been treated as exempt for the purposes of fundraising.
The case concerned the two appeals, one against the assessment, the other against the refusal to allow a claim for overpaid tax, which the Society argued was submitted out of time.
On 30 April 2020, the appellant’s VAT agents, Vatangles Consultancy, made a voluntary disclosure to HMRC of overdeclared output tax and overclaimed input tax for admission income for the 2016 show.
The claim was made on the basis that the show should have been treated as exempt under the fundraising exemption in schedule 9 Item 1 of VAT Act 1994 (VATA 1994).
The exemption covers supplies made by a charity running a fundraising event. The event must be organised by a charity or qualifying body, with its primary purpose to raise money.
On 4 May 2020, the appellant submitted an error correction notice concerning the period 09/16 and claimed a net VAT repayment of £201,949.01.
It later confirmed on 24 November 2020 that it had also treated the 2017 show as exempt from VAT. However, this was later rejected by HMRC on 7 May 2021.
Shortly after the rejection of the claim, HMRC wrote to the appellant asking them to calculate the VAT due for the periods from 1 April 2017 to 31 March 2021.
On 5 December 2021, HMRC assessed the appellant under s73(1) VATA 1994 for the VAT period 12/17 in the name of £90,776. This was said to relate to admission fees, sponsorship income, and advertising.
At the FTT, the appellant appealed on the basis that HMRC’s assessment was made out of time and that it was not made in HMRC’s ‘best judgment’.
The tribunal asserted that the assessment for period 12/17 had been made more than two years after the end of the prescribed accounting period and less than the four-year time limit contained in section 77(1)(a) of VATA 1994.
Therefore, the tribunal held that the assessment was out of time, and the appeal was allowed.
Concerning whether the fundraising exemption applied, HMRC argued that the events were ‘not advertised as fundraisers’ and the public attending were unaware of that.
HMRC stated that the show was one of a ‘commercial nature to promote farming in the community and generate profits’ and was not, therefore, an event ‘whose primary purpose was the raising of money’.
In their defence, the appellants argued that it was a charitable company limited by guarantee and was a registered charity founded in 1837. It had been registered for VAT since 1992, with its main activity listed as ‘conducting an agricultural show’.
It referred to the case of Loughborough Students Union and others v HMRC [2018], which held that Item 1(b) refers to ‘a’ primary purpose, and not ‘the’ primary purpose, and that a primary purpose means an important purpose.
In this regard, the FTT considered that either purpose, between generating a profit and fundraising, was of equal importance. Beyond that, both purposes co-existed.
Judge Christopher McNall said: ‘If fundraising were not taken as a discrete purpose, but was taken as being one of two inter-dependent purposes, then, in our view, it was the main purpose of the show, and it qualified for the exemption.
‘If fundraising were taken as a discrete purpose, then it was a main purpose of the show, and it qualified for the exemption.’
The FTT concluded that Item 1 was met and that the shows in 2016 and 2017 were organised for charitable purposes. Both of the appeals were allowed.
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