This VAT case represents a 17 year old dispute with HMRC which was originally concerned with the VAT liability of Halle’s ticket income – the question of whether the philanthropic VAT exemption applied. The issue before the Tribunal related to one final point on the VAT status of Halle’s membership scheme. Halle is a charitable organisation, set up with the aim of “promoting the study, practice and knowledge of the art of music” through its orchestral concerts and education programmes . In return for an annual subscription, Halle members could receive a number of benefits including corporate rights, priority bookings on concert tickets and publications.
The First Tier Tribunal was asked to consider whether Halle’s supplies of the membership scheme were within the scope of VAT and, if so, whether they fell within the exemption for philanthropic activities.
The FTT concluded that the Halle was making a supply of services (being a package of benefits in return for the membership fee). The question was whether the services are within the scope of the philanthropic exemption. VAT exemption applies when a not-for-profit organisation makes supplies to members of services that are in keeping with the aims of the organisation and which are not charged for beyond the membership subscription. Qualifying organisations include those with objects in the public domain that are of a philanthropic nature.
There is no statutory definition of “philanthropic”. In HMRC’s view, Halle’s activities were cultural rather than philanthropic as they primarily benefitted those who enjoy classical music rather than being for the “good of all mankind”. However, the Tribunal noted that the great philanthropists of the 19th century did not limit their activities to basic provisions such as housing and sanitation but also focussed on the arts and literature and that music should be no different. The fact that the Halle’s concerts were free or heavily subsidised meant that they wouldn’t be offered by commercial operators, further supporting the philanthropic focus.
This case is relevant to any charity/not-for-profit organisation that provides services to members in return for a subscription. The case demonstrates that the scope of the term “philanthropy” is wider than HMRC have previously accepted. It will be of particular relevance to those organisations that host events for members without further charge e.g. conferences/concerts etc. both in the UK and overseas. However the exemption is unlikely to apply where a separate and additional charge is made for entrance to an event, even if by a not-for-profit body.
