Community Amateur Sports Clubs (‘CASCs’) need to be very careful with VAT when undertaking building projects, as a recent case of a cricket club building a new pavilion clearly shows.

Eynsham Cricket Club was a CASC, but it was not a registered charity, or registered for VAT. It claimed that the building of a new pavilion for the club should qualify for VAT zero-rating on the basis that it should be treated as a charity for its aim of promoting participation in sport.

However, the club’s argument failed because although its predominant purpose was the promotion of amateur sport, it had a subsidiary purpose of providing social facilities to the residents of Eynsham through the provision of a bar and the hiring out of the facilities for events and functions.

To have secured zero rating, the club would have had to have met a number of conditions:

  • the building work must have been carried out for a charity;
  • that charity must either use the building solely for its charitable purposes or as a village hall or similar; and
  • the charity must issue a certificate to the builder to confirm its eligibility for zero-rating of services as specified in VAT Notice 708, section 17.

The club had tried to claim that it was “established for charitable purposes only”, as required by FA 2010, Sch 6, para 1(1)(a). The tribunal agreed that the club’s predominant purpose was the promotion of amateur sport, but the test in FA 2010 was breached by the subsidiary social purpose, meaning it was not a charity for VAT purposes.

However, that does not mean that other CASCs, with narrower objects, could not be seen as a charity (as Charities Act 2011, s6 envisages), but in that case the organisation is likely to be an actual charity anyway rather than a CASC.

It can be seen that definitions are complex, and HM Revenue & Customs view amateur sports clubs as an easy target, as they often do not take professional advice before embarking on building projects.

This was an interesting case in as much as whilst the club lost, it does point to the fact that the underlying charity law is poorly written, and CASCs with objects that are solely charitable could be charities for tax purposes. This would then allow them to benefit from the VAT zero rating, where all other conditions are met, and could also widen their access to grants etc.

If you would like to discuss this case and its implications for your organisation, please contact a member of our Charities or VAT team.

 
 
 
 
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