Tax Relief: A Show-Stopper for Yorkshire Agricultural Society

Earlier this year, the Yorkshire Agricultural Society (the “Society”), a farming charity that organizes the annual Great Yorkshire Show, had a good result that followed on from a FTT case we discussed in our newsletter in May 2023. Whilst the original case concerned both a 2016 VAT repayment and a 2017 assessment, this most recent case saw HMRC only appeal the 2016 VAT repayment claim decision.

Historically, the Society had paid standard-rate VAT on the income generated by its four-day event.  This changed in April 2020, when the society voluntarily disclosed to HMRC that it had overdeclared output tax and overclaimed input tax. The Society argued that, as a charity fundraising event, the event should have been exempt from VAT. Acting on this premise, the Society submitted a net VAT repayment claim for its 2016 show and treated its 2017 event as exempt. HMRC refused this claim and subsequently issued an assessment for the VAT period ending December 2017, which covered admission fees plus sponsorship and advertising income.

A Fundraising Event can be exempt from VAT where “For tax purposes, it’s an event clearly organised and promoted primarily to raise money for the benefit of the charity or qualifying body.”  HMRC’s argued in both cases the “primary purpose” of the show was not solely to raise funds, and that it had a dual purpose of fund raising and education, therefore excluding the income from the exemption. 

The Upper Tribunal however dismissed HMRC's appeal by upholding the First-tier Tribunal's view. HMRC had argued that the charity should be liable for VAT because the show’s primary purpose was not solely fundraising. Both tribunals agreed that the event had two inter-dependent purposes – fundraising and education – that were equally important. This dual-purpose approach therefore qualified the show for VAT exemption.

Furthermore, the Upper Tribunal's decision was supported by the EU Principal VAT Directive. This directive allows member states to exempt the supply of services and goods connected with fundraising events –

provided these are carried out exclusively for the public interest and are unlikely to distort competition. Thus, given that the event benefited the charity in a manner fully consistent with these provisions, HMRC's argument did not hold.

In summary, the Upper Tribunal concluded that HMRC’s appeal against the FTT’s decision, which allowed the charity’s 2016 VAT repayment claim, should be dismissed.  This ruling affirmed that the dual emphasis on both fundraising and education entitles the charity to VAT exemption for the event.

This is surely a welcome end to a very long-drawn-out process for the Society and for the charity sector. Albeit there is an inherent risk that HMRC will consider updates or challenges in respect of post-Brexit events. The debate in this case relied on EC guidance given the timing of the events in question. Accordingly, there could be future cases surrounding post-Brexit events and VAT treatment.

At VITA, we pride ourselves on the support we offer to charities. We regularly provide clarity on VAT exemptions and reliefs, with fundraising events often a key area. We are confident that this will be a very welcome result for many charities. There is a lot to discuss given cases like this and HMRC approaching charities on their VAT recovery calculations. We would be happy to support charities who would like to review a previous decision by HMRC on the use of this exemption or have a general discussion on the appropriate VAT treatment for income and expenditure.