Landmark decision on ‘activities in the course of business’
In St Paul’s Community Project and Yarburgh Children’s Trust the Court ruled that the provision of nursery facilities in return for fees charged was not an activity in the course of business. While HMRC is not happy with the Court’s judgement, it has chosen not to appeal.
These rulings represent landmark decisions, as the question of whether a charity/RSL is operating in the course of business has significant implications for a range of zero-rating reliefs.
RSLs qualify for VAT exemption on long-stay guests
Following the ruling in Afro-Caribbean Housing Association, the VAT exemption for accommodation charges on stays exceeding 28 days is no longer restricted to individuals, and now extends to organisations that contract with the accommodation provider. This includes, amongst others, local authorities and RSLs.
Thus the cost to RSLs for providing accommodation to homeless people or asylum seekers now qualifies for the ‘reduced value’ rule after 28 days. The only prerequisite is that the same person must occupy the same accommodation for the entire period concerned.
Riverside Housing Association’s case rejected
Following the Cardiff Community Housing Association’s recent success, Riverside tried to convince the VAT Tribunal, and then the High Court, that its activities were not undertaken in the course of business. If its application had been successful, the construction cost of its new head offices would not have attracted VAT on the basis that the offices are used for a relevant charitable purpose.
However, both the Tribunal and the High Court rejected the argument, holding that Riverside was involved in an economic activity with a view to a profit, and that its operations had the characteristics of being in business.
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