Archive | July 24, 2009

A taxing fitness case

July 24, 2009

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Source: Read the full case report here:

The Atrium Club Ltd v. The Commissioners for Her Majesty’s Revenue & Customs (HMRC) [2009] UKVAT V20933 (London Tribunal Centre), 21 January

This an appeal against a decision by HMRC that Atrium made supplies of taxable sporting services. The case is complicated however because it concerns multiple companies – a ‘parent’ health & fitness club (Atrium) set-up in 1991 and a number of non-profit making subsidiary organisations (Atrium Health Ltd -1996, AAB Sports Ltd -2000, FAB Ltd -2003) each replacing its predecessor in order to provide exempt sporting services. By Atrium effectively leasing the premises to the new company to operate, Atrium saved VAT on its membership fees as these fees were reclassified as exempt supplies rather than standard-rated (and therefore taxable) supplies.

This was possible because under Part A of Article 13 of the Sixth Directive, certain activities closely linked to sport or physical recreation could be exempt from VAT. In 1996, consultants (AIC) employed by Atrium suggested that the fitness club could be restructured to take advantage of this rule and make the club competitive with local authority fitness clubs, and this was what happened with the licensing of Atrium Health Ltd to handle all the operational functions of the health club.

When in 2000 the rules became stricter, so a new company (AAB) was set up by another set of consultants (WJB Chiltern) in order to meet the more demanding new criteria. In 2002, this new scheme attracted the attention of HMRC and after an investigation, Customs concluded that not only were the membership fees of AAB taxable, but that  Atrium should also be held liable for abusive practices designed to evade tax.

The Tribunal held at [70] however that while the WJB Chiltern scheme was ingenious, there was no direct nexus between Atrium and the customers. All the staff and club activities belonged to AAB rather than Atrium and it was AAB that dealt directly with the customers and paid staff PAYE contributions to HMRC. Given this conclusion, it was not possible to argue that Atrium actually supplied the sporting services [84].

HMRC’s alternative argument was therefore considered, namely that this arrangement was an ‘abusive practice’ designed to obtain a tax advantage [73]. The problem with this approach is that the scheme never worked and so no tax advantage ever occurred. When HMRC liquidated AAB for non payment of tax, all its assets were transferred to a newly created company (FAB Ltd) and HMRC could not then pursue Atrium for the debt [86], as such Atrium’s appeal against the HMRC decision was allowed.

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What’s in a name? well quite a lot actually by the sounds of it…

July 24, 2009


Sources: Full case report – 

Lambden v. Henley Rugby Football Club & Henley Rugby Football Club Ltd [2009] UKEAT/0505/08/DA

The case concerns the sacking of Jon Lambden, the 54 yr-old Head Coach and Director of Rugby at Henley Hawks Rugby Club on 18th February 2008. The case itself is an appeal from the decision of the 2008 Employment Tribunal in Reading that dismissed Lambden’s claim for unfair dismissal.

At issue in the case, is the nature of the claimant’s employment relationship with the club. The claimant contends that he was employed and therefore because the club summarily dismissed him without going through the full employment procedure, he is entitled to compensation. The Club on the other hand maintains that the claimant was actually self-employed and therefore it was entitled to terminate his services as it did.

Although there was a question mark over whether the Rugby club itself or the limited company set-up to manage the club that engaged in a contract with the claimant, the Appeal  Tribunal agreed with the earlier Tribunal that the Rugby Club had no contractual relationship with the claimant and that any action would be against the limited company [36].

So why was the claimant’s employment relationship so controversial?

The problem was that Henley Rugby Club had merged two previous roles (one self-employed, the other employed under PAYE) and offered the claimant the choice of which tax status he wanted to be [21]. The claimant chose self-employed and set up his own limited company (JKNA Training Ltd) [23]. In doing so, the Tribunals found that the claimant had a clear idea as to the difference in status between the two methods of taxation [26]. This decision was not so clear-cut however when the full facts of the contractual relationship were examined

  • The claimant’s hours of work were all training evenings and match days
  • The work for the club amounted to just under one half of all JKNA invoices
  • The claimant had autonomy over playing and sporting matters (the tribunal held that this was not an indication of self-employment but rather specialist expertise superior to the club [32]).
  • The claimant was under the control of the Chairman of the Club Management Committee
  • A notice period of three months on either side was agreed
  • Salary was fixed at £27,500pa regardless of how many hours were actually worked, with provision for a bonus and importantly, 4 weeks holiday pay
  • Also included was a fully insured, leased car from the Club’s fleet and a Club credit card (although the Tribunal held that provision of a car and credit card were usually indicative of employment rather than self-employment status, it gave little weight to them, preferring the substance of the arrangements instead [27]).
  • The claimant was not expected to provide a replacement or substitute if he was unable to provide his services

Although both Tribunals held that there were aspects that pointed more to employment than self-employment, no single point was decisive and in the absence of an unequivocal finding more weight had to be given to the parties self-description (ie self-employment) [57].

Ultimately though, the decisive point in the case was the fact that the Employment Appeal Tribunal could only overrule the earlier Tribunal decision if it felt that it was in some way perverse or misdirected in law [45]. On these facts, it was impossible to say that they had and the claimant’s action failed.

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Restricted access to rugby ground

July 24, 2009


Sources: full case report –; see also an interesting Irish blog report on the case:

Hannon & Others v. BQ Investments [2009] IEHC 191

The four claimants (Brendan Hannon, Martin Ryan, Declan Cusack & John Meaney) are all trustees of Thomond FC and sued the defendants over an agreement for sale of some land for a student apartment development. As part of the sale, the purchaser also agreed four special conditions (8-11) :

  1. The provision of “two suitable rugby playing pitches, levelled, top soiled and ready for seeding” on the remaining lands
  2. The relocation of the existing floodlights and electricity sub-station to one of these new pitches
  3. The club would have a right of way over the roadway and footpath for use of the pitches and clubhouse
  4. (Uncontested at trial) that the club could connect into the services installed by the purchaser.

While an earlier Circuit Court case (concerning clauses 8 & 9) was settled for an additional sum, effectively buying out the defendants obligations under the two clauses, nothing was raised about clause 10 until a year later when the claimant’s solicitors sent a letter reminding the defendants about their obligation to construct and light a right of way to the pitches.

The dispute in this case therefore relates to the meaning of the words in clause 10 and in particular when the obligation to build this roadway and footpath became due. The problem is that while the location of the right of way was agreed by both sides, no formal clubhouse actually existed (simply a temporary portakabin). The defendants therefore argued that they did not need to build a new right of way to this land as other pre-conditions had not been fulfilled. By contrast, the claimants argued that their actual use of the land was irrelevant but that any plans they did have for the land was compromised without the right of way, but even if it were not, clause 10 is a stand-alone clause.

Ultimately the court decided that the phrase ‘for use of the’ related to the purpose of the land, rather than any condition precedent  and that as a result the defendants were in breach of contract. The court however reserved any decision on awarding damages or specific performance until after further evidence had been heard about the future plans for the land.

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Racing case did not crash out of court

July 24, 2009


Sources: Full case report –

Opinion of Lady Clark of Calton in the cause of Pearce v. Ferguson & Another [2009] CSOH 39

This case is an ex tempore oral opinion given by Lady Clark of Calton in the Scottish Court of Session (Outer House) in order to advise the parties. The issue relates to a negligence action for personal injuries during a test session ahead of a motor race at Knockhill Racing Circuit.

Although the defendant tried to argue that the claimant was a voluntary participant and motor racing carried an inherent risk [4], this was rejected by the court. In particular, at [5] it was noted that ‘it is not a matter within judicial knowledge as to what risks or dangers might be common or expected or exist by participating in test sessions at Knockhill Racing Circuit. I certainly cannot conclude that it is within judicial knowledge that the pursuer had voluntarily agreed to the risks of an accident of the type averred or that such accidents were part of the common risks of the sport at that particular racing circuit. I am of the opinion that evidence would be required about this.” (I’m guessing then that Lady Clark will not be watching the Hungarian Grand Prix this weekend!)

The opinion concluded at [7] with the rejection of the defence’s plea for a summary dismissal, and the note that it will only be possible to establish whether the defendant was in breach of his duty once the full facts have been established. We now wait for the full trial….

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