The start of 2025 saw news that The Yorkshire Agricultural Society (the “Society”) had succeeded, at the Upper VAT Tribunal, in defending its request for a repayment of the overpaid VAT it had paid in respect of its 2016 Great Yorkshire Show. This case revolved around whether the admission fees for the 2016 Show were exempt from VAT under provisions for fundraising events organized by charities. The Society had accounted for VAT on this income.
Background
The Society, a charity promoting agriculture and education in the North of England, argued that admission charges for the 2016 Show should have been VAT-exempt under Group 12 of Schedule 9 of the Value Added Tax Act 1994 (VATA1994). HMRC disagreed, claiming the event did not meet the exemption criteria, particularly on whether the Show’s primary purpose was fundraising.
After the First-tier Tribunal (FTT) ruled in favour of the Society, HMRC appealed to the Upper Tribunal, challenging the interpretation of two key conditions for VAT exemption:
- Primary Purpose Test (Item 1(b)): Was the primary purpose of the event the raising of money?
- Promotion Condition (Item 1(c)): Was the event promoted as being primarily for fundraising?
Upper Tribunal Decision
Primary Purpose Test
The Tribunal confirmed the FTT’s findings that fundraising and education were interdependent purposes of the Show, with fundraising being a critical aspect. The tribunal determined that the event satisfied the criteria under VATA1994, even if fundraising was not the sole purpose, it was still a purpose.
Promotion Condition
HMRC argued that the exemption required the event to be explicitly promoted as being primarily for fundraising, a condition not mentioned in the EU VAT Directive 2006/112/EC. The Tribunal found this condition incompatible with EU law and ruled that it should be interpreted as requiring promotion “for the raising of money” rather than “primarily” for that purpose.
Outcome
The Tribunal dismissed HMRC’s appeal, allowing the Society’s 2016 repayment claim to stand. The decision highlights the importance of a purposive approach to VAT exemptions for fundraising events and clarifies the scope of promotional requirements for such events.
Key Takeaways for Charities running events
- Fundraising and other purposes (e.g., education) can coexist, provided fundraising remains a significant goal.
- Promotional materials need not explicitly state that fundraising is the primary purpose but must indicate a connection to fundraising.
This case underscores the nuanced interpretation of VAT exemptions and serves as a reminder for charities to carefully document the purposes and promotion of their events to ensure compliance.
Whilst securing a VAT exemption is clearly a benefit in reducing the VAT liability on income generated the charity would need to calculate the impact of irrecoverable VAT on incurred costs that this exempt income would trigger.
It’s an important case, however, for any charitable body to be alert to and to consider whether it will have a retrospective benefit if their activities mirror the fund-raising position established from this legal review process.
HMRC may still appeal this decision to a higher court, but an Upper Tribunal decision does create legal certainty that can be relied upon by a taxpayer in the interim.
Xeinadin has a dedicated VAT specialist team that are there to assist clients when VAT gets complicated – they can be contacted via [email protected] if this issue is something you’d like to discuss in more detail.
