case alert: serpentine trust ltd tc 03992
DESCRIPTION
The First-tier Tribunal (FTT) has issued a decision in this case that could have far reaching and potentially expensive repercussions for the not-for-profit / charity sector. The issue in question was whether the Trust's 'friends' schemes – of which there were four – should be treated as a single supply of a mixed bag of goods and services or, as the Trust contended, as a partial donation and consideration for a basket of separate goods or services subject to VAT at different rates. The FTT ruled that in the circumstances, there was a single supply of the benefits and the supply was subject to VAT at the standard rate. In each of the schemes, the FTT found that there was no opportunity for the 'friends' to purchase the benefits on offer for anything less than the full price. As a consequence, the FTT ruled that the total payments made by the friends under the various schemes should correctly be regarded as payments 'for' the benefits and could not be regarded as donations. The Trust then tried to argue that the supplies of the various benefits constituted multiple supplies each of which attracted its own VAT liability. The FTT dismissed that argument too. Whilst there certainly were a number of different benefits available to the friends, there was a single supply of the 'right to partake at exclusive events at and offers by the Serpentine gallery'. Finally, the FTT confirmed that, in its view, the zero-rated element of the benefits (the printed brochures etc) should not be treated as a separate element of the package at all. According to the FTT, there was a single supply of all of the benefits and it did not consider that the zero-rated element could be singled out and treated differently. Comment – As a FTT decision, this case is binding only on the parties involved. However, it seems that the FTT considers that the existing extra statutory concession, (which does allow not-for-profit bodies to separate out and zero-rate the element of a subscription relating to printed matter), is not legally valid. Charities and other not-for-profit organisations that operate similar 'friends' or membership schemes or operate the printed matter concession will, following this decision, need to review their exact arrangements and, where necessary, obtain agreement from HMRC that operation of the concession may continue.TRANSCRIPT
First-tier Tribunal
Serpentine Trust Ltd TC 03992
The First-tier Tribunal (FTT) has issued a decision in this case that could have far reaching and potentially expensive repercussions for the not-for-profit / charity sector. The issue in question was whether the Trust's 'friends' schemes – of which there were four – should be treated as a single supply of a mixed bag of goods and services or, as the Trust contended, as a partial donation and consideration for a basket of separate goods or services subject to VAT at different rates.
The FTT ruled that in the circumstances, there was a single supply of the benefits and the supply was subject to VAT at the standard rate. In each of the schemes, the FTT found that there was no opportunity for the 'friends' to purchase the benefits on offer for anything less than the full price. As a consequence, the FTT ruled that the total payments made by the friends under the various schemes should correctly be regarded as payments 'for' the benefits and could not be regarded as donations.
The Trust then tried to argue that the supplies of the various benefits constituted multiple supplies each of which attracted its own VAT liability. The FTT dismissed that argument too. Whilst there certainly were a number of different benefits available to the friends, there was a single supply of the 'right to partake at exclusive events at and offers by the Serpentine gallery'.
Finally, the FTT confirmed that, in its view, the zero-rated element of the benefits (the printed brochures etc) should not be treated as a separate element of the package at all. According to the FTT, there was a single supply of all of the benefits and it did not consider that the zero-rated element could be singled out and treated differently.
Comment – As a FTT decision, this case is binding only on the parties involved. However, it seems that the FTT considers that the existing extra statutory concession, (which does allow not-for-profit bodies to separate out and zero-rate the element of a subscription relating to printed matter), is not legally valid. Charities and other not-for-profit organisations that operate similar 'friends' or membership schemes or operate the printed matter concession will, following this decision, need to review their exact arrangements and, where necessary, obtain agreement from HMRC that operation of the concession may continue.
For further information in relation to any of the issues highlighted in this Case Alert please contact:
The Regions Stuart Brodie [email protected]
London/South East Karen Robb [email protected]
The Midlands Mike Sheppard [email protected]
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