Important Charity tax relief case win

Charities in Northern Ireland and the rest of the UK could benefit greatly from the recent tax relief case involving Buckinghamshire charity, Longridge On The Thames.

In 2010 the outdoor activity charity constructed a new training centre at the cost of £760,000, with further costs to fit out the building with supplies. The overall expenditure incurred a VAT bill of £135,0000. The charity asserted that VAT relief should apply because of the rules relating to new buildings that are used wholly for "relevant charitable purposes". The HMRC however disputed this claim on the basis that fees were charged by the charity for its activities, and that the centre was therefore being used for business purposes, and the zero-VAT rate could not be applied.

The Commissioners for HMRC had previously ruled that the building was not intended to be used for solely charitable purposes and that VAT was therefore payable. The charity appealed against the decision and the first-tier VAT tribunal ruled that even though fees were charged, they were only done so for to fulfill charitable objectives. It also pointed out that the fees charged were much lower than those charged by local authorities and commercial organisations carrying out similar activities, and that the work was heavily subsidised by donations. As such the tribunal found in favour of the charity and the building costs were held exempt from VAT.

If you manage a third sector non-profit company in Northern Ireland and require legal advice in respect of any matter, contact one of the solicitors specialising in Social Enterprises at Wilson Nesbitt in Belfast by calling 028 9127 8166.