Taxation

Value added tax - unincorporated association obtaining services on behalf of members - taxable supplyEastbourne Town Radio Cars Association v Customs and Excise Commissioners: HL (Lord Slynn of Hadley, Lord Hoffmann, Lord Cooke of Thorndon, Lord Hobhouse of Woodborough and Lord Scott of Foscote):4 April 2001The rules of an unincorporated association, set up by a group of private hire drivers to run a booking and administration service, provided for its management by a committee which had power to hire staff and obtain telephone and other services from third parties.

In 1994 the rules were amended to provide that the association obtained such staff and services, and was reimbursed by members, solely as a paying agent enabling members themselves to employ the staff and engage the other services.

The association applied to have its VAT registration cancelled on the ground that it was no longer supplying services in the course of a business within section 4(1) of the Value Added Tax Act 1994.

The commissioners' refusal to cancel the registration was upheld by the VAT tribunal but reversed by the judge.

The Court of Appeal [1998] Gazette, 10 June 26 restored the tribunal's decision.

The association appealed.Joe Smouha (instructed by Brachers, Maidstone) for the association.

Melanie Hall and Philippa Whipple (instructed by Solicitor, Customs and Excise) for the commissioners.Held, dismissing the appeal, that the commercial reality was that members paid fees to the association for engaging staff, whether as employees of the association or of the members, on the terms of its constitution, and in providing the other services; that that was provision by an association for consideration of facilities to its members within section 94(2)(a) of the Act so as to be deemed to be the carrying on of a business by the association and therefore the provision of a taxable supply of services by it within sections 4(2) and 5(2) of the Act; that since the quantity of such supplies exceeded the threshold figure for the payment of VAT, the association was required to be registered and was therefore a taxable person; and that, accordingly, there was a taxable supply made by a taxable person in the course or furtherance of a business carried on by the association within section 4(1) and VAT was chargeable.

(WLR)