Graham Elliott, VAT expert at City & Cambridge Consultancy asks when a charity is not a charity following Wakefield College VAT decision, whether goods or services in paragon, language barrier reasonable excuse
Charitable or not?
More certainty than before seems to apply to determining whether a charity (for instance) carries out business, or non-business, activity, but, as if we were in need of more guidance, the Court of Appeal has issued a further decision which needs to be factored into people’s interpretations. This is the case of Wakefield College (EWCA Civ 952).
The College built a new building which it thought should be zero rated on the basis of non-business use. However, HMRC allows only 5% ‘tolerance’ of business activity in respect of the relief. Over 5% of the College’s students were fee paying (though still a small minority). Of these, the proportion that paid full fees was sufficiently small to be less than 5%. The aggregate of these and of students paying heavily reduced fees breached the 5%. But the College argued that the heavily reduced, subsidised, fees were for a non-business activity. HMRC disagreed.
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