The conditions to apply the VAT exemption on admission to fundraising events were considered in detail in the Yorkshire Agricultural Society case. The VAT exemption must be applied if the conditions are met in full i.e. VAT is not applicable on the admission nor recoverable on the related costs subject to the usual VAT rules.
What is a fundraising event?
A fundraising event is one that is clearly organised and promoted primarily to raise money for the benefit of the charity or the qualifying body.
What are the conditions to apply the VAT exemption?
The supply of goods and services by a charity or a qualifying body in connection with an event qualifies for VAT exemption if the following conditions are met:
- For a charity, it is organised for charitable purposes by a charity or jointly by more than one charity. For a qualifying body, it is organised exclusively for the body’s own benefit;
- The primary purpose is the raising of money; and
- It is promoted as being primarily for the raising of money.
There is a further restriction to prevent the distortion of competition for suppliers of similar types of event. The eligible events are restricted to 15 events of the same kind at the same location in the charity or qualifying body’s financial year. If there are 16 or more events then none of the events will qualify for the exemption.
What types of events may be covered by the VAT exemption?
The HMRC guidance provides the following as examples of events which may be held for fundraising purposes:
- “ball, dinner dance, disco or barn dance
- performance – concert, stage production and any other event which has a paying audience
- showing of a film
- fete, fair or festival
- horticultural show
- exhibition: art, history or science
- bazaar, jumble sale, car boot sale, or good-as-new sale
- sporting participation (including spectators): sponsored walk or swim
- sporting performance
- game of skill, contest or a quiz
- participation in an endurance event
- fireworks display
- dinner, lunch or barbecue
- an auction of bought in goods – an auction of donated goods is zero rated”
The Yorkshire Agricultural Society case summary
The Yorkshire Agricultural Society (Society) is a charitable company limited by guarantee and is a registered charity. It was formed to support and promote agriculture, rural and allied industries throughout the North of England. The Society organises and runs an annual agricultural show, which aims to fundraise and educate with an admission charge for members of the public.
A voluntary error correction notification was filed with HMRC in May 2020 on the basis the 2016 show met the fundraising exemption conditions i.e. the standard rate of VAT was incorrectly applied on the admission income and VAT was overclaimed on the related costs, resulting in a net overpayment of VAT to HMRC. Whilst the Society accepted the show had not been promoted primarily for fundraising, they contended admission income should have been VAT exempt. The Society confirmed to HMRC the 2017 show had also been treated as exempt in November 2020. In May 2021 HMRC disagreed and refused the repayment claim in respect of the 2016 show. The Society appealed the decision to the First Tier Tribunal (FTT). HMRC issued an assessment for the 2017 show’s admission income in December 2021, which was also appealed by the Society to the FTT.
The FTT considered:
- The exemption conditions in detail after HMRC argued the second and third conditions had not been met; being the primary purpose of raising money and being promoted as being primarily for the raising of money respectively.
- Whether the 2017 show assessment was issued too late and therefore out of time.
The FTT recognised:
- The show had two main purposes, fundraising and education, which were interdependent and of equal importance.
- The domestic legislation should be interpreted to conform with the EU Directive it is implemented under and therefore considered primarily should be omitted from the conditions.
The FTT ruled:
- The exemption conditions were met in full and the Society’s appeal to the rejected claim in respect of the 2016 show was allowed; and
- The HMRC assessment for the VAT due on the 2017 show was out of time where it was raised more than one year after the evidence of facts. However, the FTT confirmed that even if the assessment had been issued within time, the 2017 show also met the conditions in full to qualify for the VAT exemption. The Society’s appeal against the assessment was allowed.
What is the impact of the Yorkshire Agricultural Society case?
The FTT found the domestic legislation restricted the exemption beyond the intention of the EU Directive, resulting in a narrow interpretation and therefore application of the exemption. Whilst the FTT ruling is only binding to the parties in the case, subject to any appeal made, the decision can influence similar cases.
Any questions or for advice about the VAT exemption, please contact the VAT consultancy team.