In Eynsham Cricket Club v HMRC [2019] UKUT 47, the UT decided to remake the FTT’s decision so that the parties could argue a point before it which had not been argued before the FTT.

Background

The appeal concerned whether the construction of a cricket pavilion by Eynsham Cricket Club (Eynsham), was zero rated for VAT purposes. Eynsham argued that it was a charity and could therefore receive zero-rated building services from its contractor. HMRC decided the conditions for zero rating were not met and refused its claim. Eynsham appealed to the FTT.

The FTT found that the club was established for ‘charitable purposes’, which was the main point of contention between the parties, but it also found that the club was established for the subsidiary purpose of providing social facilities to the residents of Eynsham (the subsidiary purpose point) and dismissed the appeal.

Enysham appealed to the UT on the ground that the subsidiary purpose point had not been relied on by either party and the FTT had not heard any submissions on it. It also argued that, in any event, the subsidiary purpose was a charitable purpose.

HMRC accepted that the basis on which the FTT had decided the relevant issue was wrong in law, and both parties agreed that the FTT had decided the point on a basis which was ‘entirely unprompted and of its own volition’.

However, in its response to Enysham’s grounds of appeal to the UT, HMRC sought to introduce a new argument on the basis of which it contended that the FTT’s conclusion on the issue could stand so that the appeal could be dismissed. HMRC’s argument was essentially that Enysham’s constitution was drafted too broadly for it to be established for charitable purposes only (the establishment point). Before the FTT, HMRC had solely argued that Enysham did not meet the public benefit test.

HMRC applied to the UT for permission to rely on a new argument. Eynsham opposed HMRC’s application and argued that had this new argument been raised before the FTT, then it would have made efforts to identify and adduce factual evidence relevant to this argument.

The matter came before the UT in a case management hearing. The issue was whether either or both parties should be permitted to argue a point on appeal which had not been taken before the FTT.

UT decision

In the view of the UT, the FTT had not been given all the help it might have been to determine the establishment point by reference to Enysham’s constitution. It was therefore no surprise that the FTT had proceeded on the basis that Enysham had been established for a charitable purpose.

The UT commented that Enysham had clearly stated in its own grounds of appeal that it wished to raise the establishment point. In the view of the UT, it would not be in the interests of justice to enable it to do so in circumstances where HMRC was precluded from raising it because Enysham says it could not be argued properly without it being given an opportunity to adduce new evidence. That issue must apply equally to both parties. Accordingly, the UT decided not to grant permission to either party to argue the establishment point before the UT.

Having reached this conclusion, the UT decided to remake the FTT’s decision by allowing Enysham’s appeal on the issue of whether it was established for charitable purposes. The effect of the decision on this preliminary issue is that Enysham is regarded as having effectively succeeded in its appeal before the FTT.  When the case proceeds to a substantive hearing before the UT, it will be on the basis that Enysham was established for charitable purposes only. 

Commentary

The circumstances in which the parties in this case now find themselves are unusual. The UT commented that the outcome was “clearly an imperfect conclusion because all the relevant law was not made available to the FTT, and if it had been, and the establishment point argued, then of course the decision may have been different”.

The difficulties caused in this case might have been avoided if the FTT had invited submissions from the parties on the subsidiary purpose point during the course of the hearing, or after the hearing had been concluded. 

The decision will be of interest to the many charitable organisations which are not registered with the Charities Commission. 

A copy of the decision can be viewed here.