Society can set off campaigning costs for VAT

Law REPORT: 3 febrUARY 1998

The costs of campaigning incurred by a society promoting field sports on behalf of subscribing members were incurred in the course of its business for the purposes of valued added tax.

Commissioners of Customs and Excise v British Field Sports Society; Court of Appeal (Lord Justice Beldam, Lord Justice Hutchison and Lord Justice Mummery) 30 January 1998

The Court of Appeal dismissed the appeal of the Commissioners of Customs and Excise against the decision of Mr Justice Hidden, upholding the decision of the Value Added Tax Tribunal in favour of the British Field Sports Society on its appeal against value added tax assessments.

David Milne QC and Aparna Nathan (Knights, Tunbridge Wells) for the British Field Sports Society; Nigel Pleming QC and Robert Jay (Solicitor, HM Customs and Excise) for the Commissioners.

Lord Justice Beldam said that the society had been formed with a view to protecting the rights of its members to carry on field sports. In order to counteract the recent increase in attacks upon the right to carry on field sports, the society had decided to make a substantial increase in its use of outside consultants in public relations, research, campaigning, printing and in supplying the media with information.

Until 1990 the society had been treated as outside the scope of VAT, not being a business as defined in section 47 of the Value Added Tax Act 1983. In 1990 the society had begun to offer members substantial legal liability insurance and a free legal help line, as well as other insurance cover, free copies of its newspaper and a free country sports directory.

From 1990 onwards the society had been required to account for VAT on its subscription income at the standard rate; that proportion of the subscription attributable to insurance was allowed as an exempt supply, and the part attributable to the provision of literature as a zero-rated supply.

In April 1993, however, the Commissioners had sought to deny the society the right to set off input tax by ruling that the tax it incurred in providing its members with professional services in public relations, printing, publishing, lobbying and its other campaigning activities was not attributable to the facilities or advantages available to its members and was not, thus, incurred in the course of a business within section 47(2)(a) of the Act. It was still required to account for VAT on subscriptions as it was providing facilities and advantages to its members, and was thus deemed to be carrying on a business within the meaning of section 47(2)(a) of the Act. That was the ruling which had given rise to the society's appeal to the Tribunal.

The Commissioners argued that acting as a collective voice, campaigning on behalf of members, even furthering the interests of members by such campaigning could not, without more, be the provision of a facility or advantage to those members. The society contended that its campaigning services provided clearly identifiable benefits to members who could not, individually, provide them effectively. It argued further that output tax and input tax must be treated consistently, and that the Commissioners were seeking to treat them inconsistently.

The scope of the phrase "facilities or advantages" in section 47 of the Act was very wide and it was therefore permissible to resort to the meanings which would ordinarily be given to the words. "Facilities" referred to the means, resources or conveniences which made it easier to achieve a purpose, and "advantages" meant the benefit or gain, usually of something not previously enjoyed or available. On that basis the conclusion of the Tribunal was entirely justifiable. The society, in return for the subscription, provided members with the facility or advantage of putting forward a collective view in a professional way, using the means which in modern conditions were essential if public opinion was to be effectively influenced.