BACS do not have to become arms dealers!

March 18, 2009

tax

Source: The British Association for Shooting and Conservation Ltd v. The Commissioner for Her Majesty’s Revenue and Customs [2009] EWHC 399 (Ch)

 

The High Court (Chancery Division) has just heard an appeal from the VAT & Duties tribunal on whether membership subscriptions for the British Association for Shooting and Conservation Ltd (BASC) should be taxable. Ultimately the court hedged its bets and referred the matter back down to the tribunal to review its decision, on an error of law. It did however confirm a number of important principles.

 

The case hinged on the subscription income (£5.6m in 2007) received by BACS from its 130,000 members. Members would then receive a magazine (zero-rated), insurance (exempt-rated) and a number of other services. Revenue & Customs suggest that these other services should be classed as standard-rated and therefore liable to VAT.

 

At the tribunal, neither side objected to these services being bundled together, however in the High Court, BACS sought to unbundled them into specific services or products, in a view to minimising any tax liability. This was rejected in this case (but not for any future assessments) as these points had not been raised originally at the tribunal.

 

BACS relied on two exemptions to argue that they were not liable to VAT:

1)       CIVIC or POLITICAL – “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 or competition.” (Article 132 (1)(L)  EC Council Directive 28 November 2006) and

2)       SPORT – “certain services closely linked to sport or physical education supplied by non-profit-making organisations to persons taking part in sport or physical education” (Article 132 (1)(M)  EC Council Directive 28 November 2006)

 

 

Civic or Political Exemption

In order to prove this exemption, BACS needed to prove five things:

a)       that it is a non-profit organisation (agreed)

b)       that it makes supplies of services (agreed)

c)       that the services are supplied for the benefit of its members (agreed)

d)       that the services are supplied in return for a fixed subscription (agreed)

e)       that the aims of the organisation are of a political, trade-union, religious, patriotic, philosophical, philanthropic or civic nature (disputed)

 

The Court ultimately held that although BACS had multiple aims, including conservation and political roles, the tribunal was right in deciding that BACS primary aim was in being a representative body for sporting shooters. As such this role was not sufficiently civic or political, and the appeal on these grounds was rejected.

 

 

Sporting Exemption

BACS appeal on sporting grounds was more controversial and again needed to satisfy five parts:

a)       that it is a non-profit-making organisation (agreed)

b)       that it makes supplies of services (agreed)

c)       that the services are supplied to persons taking part in sport (disputed)

d)       that the services are closely linked to sport (disputed)

e)       that the supply is essential to the transactions exempted (disputed)

 

In deciding parts 3-5, the High Court placed a lot of weight on the recent ECJ decision in Canterbury Hockey Club v. Revenue & Customs Commissioners [2008] STC 3351 which also concerned subscription fees. The High Court decided that the exception applied to sport generally rather than specific categories and those services are closely related to participation in sport only if they are “ancillary” to that participation (ie not an end in themselves but an enhancement of participation).

 

The key decision for a court is therefore ‘whether BACS services are essential to the sport of shooting?’ The court held at [36] that while the tribunal made a number of errors of law in BACS’s favour, the key test expressed of whether there was a direct link between BACS and its members was too high and therefore an error of law. As such, the case was referred back to the tribunal to decide this issue again.

 

The fact that this test does not have to be direct is good news, and means that BACS does not have to become a major arms dealer and supply guns to its members! However, it will need to make out a better case that what it is doing has a close link to participation. In this respect, the fact that membership of BACS is not compulsory is a factor that will count against them, as it will be more difficult to evidence that their services are essential.

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About Kris

Associate Professor in Sports Law, Staffordshire University; British Gymnastics Senior Coach

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  1. BASC makes sport shooting possible « The Sports Law Canary - October 29, 2010

    […] BASC makes sport shooting possible Last year, we covered the case of British Association for Shooting and Conservation Ltd (BASC) and their dispute with the tax authorities over the status of membership subscriptions: https://sportslawnews.wordpress.com/2009/03/18/bacs-do-not-have-to-become-arms-dealers/ […]

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