Eynsham CC v HMRC: Club Cannot Be A Charity
The Court of Appeal has confirmed that, as a community amateur sports club (CASC) was to be treated as not established for charitable purposes under the Charities Act 2011, it could not be a charity for any purpose, including for tax purposes under Schedule 6 to the Finance Act 2010 (FA).
In this article we summarise the issues in the case and key takeaways for charities and amateur sports clubs.
The issues considered in this case are:
- Did section 6 of the Charities Act 2011 prevent CASC from being treated as established for charitable purposes, and therefore prevent the Club from being a charity within the meaning of Schedule 6 of the FA and entitled to VAT zero-rating of supplies for construction services?
- If the Club failed on the first issue, did denying VAT zero-rating to the Cub (as a CASC established for exclusively charitable purposes but deemed not to be so established) breach the EU principles of equal treatment and/ or fiscal neutrality?
On the first issue, the Court held that the ordinary meaning of section 6 Charities Act 2011 was to treat a CASC for all purposes, and not just regulatory and administrative purposes, as not being established for charitable purposes. The club could not therefore be a charity for the purposes of Schedule 6 FA and could not obtain the benefit of VAT zero-rating on the supply of the relevant construction services.
On the issue of equal treatment, the Court held that a cricket club that was registered as a charity was materially different to a cricket club that was registered as a CASC. They are treated as separate and different entities, governed by different regulatory regimes and eligible for different tax treatment. Eligible bodies that chose not to qualify and register as charities could register as a CASC to obtain different tax reliefs and lesser regulatory burdens but could not qualify as a charity.
The principle of equal treatment did not apply, as there was no requirement for two materially different entities to be treated in the same way.
Hopefully, this clear judgement settles the point that a CASC cannot be a charity and cannot therefore benefit from charity tax reliefs. There is a sharp dividing line between the two statuses. If eligible, a local amateur sports club can either:
- Register as a charity – this brings with it more onerous administrative and regulatory requirements, but full tax benefits of charity status
- Register with HMRC as a CASC – this brings more limited tax benefits, but without the administrative and regulatory burdens of being a charity
If this were not the case, CASC would be entitled to tax reliefs available to charities without having to register as a charity or fit within an express exception. As the CA said in their decision, this would be anomalous.