20679
VAT – EXEMPT SUPPLIES – Camping and Caravanning Club – whether an organisation with aims of philanthropic nature – real aim providing camping opportunities and membership services and having highly satisfied members – did not connote an aim or object of promoting the well-being of mankind by serving ones fellow men – aims not philanthropic – Appeal dismissed
MANCHESTER TRIBUNAL CENTRE
THE CAMPING AND CARAVANNING CLUB Appellant
- and -
HER MAJESTY'S REVENUE and CUSTOMS Respondents
Tribunal: MICHAEL TILDESLEY OBE (Chairman)
Sitting in public in Birmingham on 4 and 5 February 2008
Roger Thomas, counsel instructed by Baker and Tilley for the Appellant
James Puzey, counsel instructed by the Solicitor for HM Revenue & Customs, for the Respondents
© CROWN COPYRIGHT 2008
DECISION
The Appeal
- The Appellant was appealing against the Respondents' decision dated 1 December 2006 to the effect that the Appellant was not a body with objects in the public domain which were of a philanthropic nature under item 1(e) group 9 schedule 9 of the VAT Act 1994. The Respondents' decision had the effect of rejecting that part of the Appellant's voluntary disclosure which sought recovery of VAT incurred on membership subscriptions.
The Dispute
- The Appellant was the oldest camping and caravanning club and the second largest operator of camp sites in the world. The dispute concerned whether the Appellant's supplies to its members in return for a subscription were exempt from VAT. The sole disputed issue concerned whether the Appellant's aims were of a philanthropic nature. There appeared to be a subsidiary issue about whether the Appellant's aims were in the public domain, wording found in the national legislation but not in the relevant Article of the Sixth Directive. However, the Respondents conceded that if the Appellant's aims were of a philanthropic nature they would inevitably be in the public domain. In those circumstances I did not consider the issue of public domain contentious.
The Law
- Article 13.A.1 (l) of the Sixth Directives provides an exemption from VAT in respect of:
"the supply of services and goods closely linked thereto for the benefit of their members in return for a subscription fixed in accordance with their rules by non profit-making organisations with aims of political, trade-union, religious, patriotic, philosophical, philanthropic or civic nature, provided that exemption is not likely to cause distortion of competition".
- Item 1(e) group 9 schedule 9 of the VAT Act 1994 enacts Article 13.A.1 (l) in United Kingdom Legislation:
"The supply to its members of such services and in connection with those services of such goods as are both referable only to its aims and available without payment other than a membership subscription by any of the following non-profit making organisations –
(e) a body which has objects which are in the public domain and are of a political, religious, patriotic, philosophical, philanthropic or civic nature".
The Evidence
- I heard evidence from Mr Neville Ramsbottom, Chairman, Mr Robert Louden, Director General and Mrs Elizabeth Simpson, Finance and Administration Director, for the Appellant. The parties produced bundles of documents which were admitted in evidence. The Respondents' bundle contained the witness statement of John Caven who made the disputed decision under Appeal.
The Facts
Brief History
- The Appellant was the oldest camping and caravanning club and the second largest operator of camp sites in the world.
- The Appellant's history was set out in First in Field which was published in 2001 to mark its centenary year. The Appellant was originally formed in 1901 as the Association of Cycle Campers when six people camped at Wantage. In 1906 the Appellant acquired its first camp site at Weybridge. In 1919 the Appellant changed its name to The Camping Club of Great Britain and Ireland. In 1933 the Appellant initiated the formation of the International Federation of Camping and Caravanning.
- During the inter-war years the Appellant was engaged in extensive lobbying activities resisting the introduction of local and national legislation restricting camping. The result of its lobbying activities was that it became the first organisation to gain exemption from the requirements of the Public Health Act 1936. The effect of the exemption enabled the Appellant to run its own camp sites without a licence from a local authority, and its members could camp freely on any site where camping was a sideline. Also during this period the Appellant's members were active in the campaign of the right to access to the countryside which included taking part in the Kinder Scout Trespass.
- In 1947 the Appellant changed its structure and was incorporated as a Company Limited by Guarantee. Since the Second World War the Appellant has experienced a massive increase in its membership from 13,000 in 1950 to a current membership of around 400,000 representing one per cent of the population of the United Kingdom. Services to members were expanded generating income from commissions on a range of financial and insurance services. The Appellant's turnover increased from £5 million in 1990 to £17 million in 1999. The Appellant also started to produce data sheets on all aspects of camping and caravanning which were available to members of the public.
- The Appellant's Presidents have included Captain Robert Falcon Scott, Scott of the Antarctic, and Lord Baden Powell, the Father of Scouting. The current President was Professor David Bellamy OBE. HRH The Prince Philip, Duke of Edinburgh KG KT OM was the Royal Patron of the Appellant.
The Appellant's Organisational Structure
- The Appellant was a company limited by guarantee, a non-profit making members' organisation but not a registered charity. The governing body for the Appellant was the National Council which consisted of elected members who received no remuneration for their services. National Council was supported by an employed executive comprising around 180 administrative members of staff and over 200 site staff headed by the Director General.
- One third of its administrative staff were employed in call centres dealing with membership enquiries and bookings, 21 staff dealt with foreign travel, membership administration, publications, marketing and public relations, 12 members of staff were involved in site administration, two staff were employed as technical officers dealing with issues specific to camping and caravanning with the remainder of the administrative staff involved in support functions, such as finance, estates and information technology. There was a technical sub-committee comprising of members examining standards for camping and caravanning.
- The Appellant had a regional and district structure, consisting of 13 regions and 93 District Associations. Members were required to pay an annual subscription to the Appellant.
The Appellant's Exempt Status under the Camping and Caravanning Legislation
- The Appellant was an exempt organisation under the Public Health Act 1936 (1936 Act) and The Caravan Sites and Control of Development Act 1960 (1960 Act). The grant of exempt status under the two sets of legislation enabled the Appellant to operate caravan and camping sites without the need for a site licence from a local authority and without express planning permission.
- In order for the Appellant to qualify as an exempt organisation under the 1936 and 1960 Acts it must have a formal constitution which included an objective of promoting recreational or instructional activities, sufficient resources, and adequate arrangements for the management and support of its sites and activities. Further the Appellant was required to have a code of conduct which its members were expected to comply with at all times.
- The Appellant's exempt status required it to operate as a membership organisation and placed significant restrictions on the services it could supply to the general public. The Director General accepted in cross-examination that the Appellant could not operate without the benefit of its exempt status under the 1936 and 1960 Acts.
The Appellant's Aims
- Mr Ramsbottom, the Chairman, described the Appellant as run by members for the benefit of members. Mr Louden, the Director General, adopted a different perspective stating that "the club does not exist just for its members, nor do they join for the benefits. The club exists as its objects state "to encourage and help all".
- The National Councillors' Report and Financial Statements dated 28 February 2007 recorded the Appellant's principal activities as:
"…. the promotion of all aspects of camping and caravanning and the co-ordination of activities of separately run sites, sections and regional organisations".
- The same report expressed the long term strategy for the Appellant as:
"The Club aims to be the best provider of camping and caravanning and information services, which will result in having highly satisfied members".
- The Appellant's mission and vision as described respectively on its website were to provide campsites and services in the spirit of The Friendly Club and to have highly satisfied members.
- The Memorandum of Association specified 18 objects for the Appellant which were as follows:
a) To encourage and to help all, especially young people and those with limited means, greater knowledge, love and care of the countryside, to develop their self reliance and independence and to promote their physical health, spiritual welfare and education by spending as much time in the open air as possible by means of camping and kindred services.
b) To protect the interests of campers.
c) To acquire by gift, purchase or otherwise, lease hold and manage camping sites for use of its members and others at reasonable charges.
d) To obtain and make available to its members and others information as to camping sites.
e) To stimulate the invention and adoption of appliances for camping, and to arrange the supply of the same to its members and others.
f) To insist on a high standard and lay down a code of good camping and obtain observance of the same by its members and others.
g) To promote and hold exhibitions, meetings and competitions to improve the standard of camping and to give prizes, medals and awards therefor.
h) To promote international understanding by the arrangement of tours and camps abroad for its members and others and by the organisation of tours and camps in Great Britain and Ireland for foreign campers and others.
i) To co-operate with the International Federation of Camping and Caravanning or any other organisation which has, as one of its objects, the promotion of international goodwill through the medium of the activities aforementioned.
j) To receive donations for the purpose of carrying out the above objects.
k) To combine with other organisations interested in camping, preservation of the countryside and access thereto in furthering any of the said objects.
l) Subject to the provisions of Section 14 of the Companies Act 1929, to purchase, take on lease, or in exchange, hire or otherwise acquire any real or personal property and any rights or privileges which the Association may think necessary or convenient for the promotion of its objects, and to construct, maintain and alter any buildings or erections necessary or convenient for the work of the Association.
m) To sell, let, mortgage or dispose of or turn to account all or any of the property or assets of the Association as may be thought expedient with a view to the promotion of its objects.
n) To undertake and execute any trusts which may lawfully be undertaken by the Association and may be conducive to its objects.
o) To borrow or raise money for the purposes of the Association on such terms and on such security as may be thought fit.
p) To invest the monies of the Association not immediately required for its purposes in or upon such investments, securities or property as may be thought fit, but so that monies subject or representing property subject to the jurisdiction of the Charity Commissioners for England and Wales shall only be invested in such securities and with such sanction (if any) as may be for the time prescribed by law.
q) To establish and support or aid in the establishment and support of any charitable associations or institutions and to subscribe or guarantee money for charitable purposes in any way connected with the purposes of the Association or calculated to further its objects.
r) To do all such other things as are incidental or conductive to the attainment of the above objects or any of them.
- The objects as specified in the Memorandum of Association have not altered since their inception in 1947.
The Appellant' Activities
- The Report of the National Council for the year ended February 2007 identified that the Appellant has three wholly owned subsidiary companies: The Camping Club of Great Britain and Ireland Limited which did not trade during the year, The Camping and Caravanning Club (Franchising) Limited, and Norman Garner Limited. The Appellant also had a 51 per cent interest in Forest Holidays LLP which was a joint venture with the Forestry Commission.
- The Appellant's business was split into five different operating activities, which were UK Club Sites, Carefree, Membership, Member Services and Unit Activities/Other.
- The National Council Chairman and Director General stated that each of the five operating activities was expected to produce a return at the end of the financial year. All money generated by the Appellant were retained and used to develop sites and facilities, and members' services.
- The Appellant's revenue for the year ended February 2007 was £36.12 million producing gross and operating surpluses of £6.9 million and £2.5 million respectively. The overwhelming majority of its revenue, £29 million, was applied to the operating costs of the sites and membership services and £4.2 million spent on administrative expenses.
- The UK Club Sites generated £18.2 million revenue for the year ended February 2007, of which £5 million related to caravan holiday home sales. The Appellant spent £11.5 million on site network costs and overheads, and £3.1 million on caravan holiday homes. The Appellant had 107 Club sites, all but two were open to the general public. The Appellant's members, however, enjoyed preferential rates and booking arrangements for the Club sites. The sales of caravan holiday homes appeared to be restricted to members.
- The Appellant has pursued a sustained programme of improving the facilities of existing Club sites, closing unsuitable sites and opening new sites. During the last ten years the Appellant has spent over £30 million in acquiring new sites and improving existing sites. Most Club sites were fully equipped with toilets, showers, electric hook-ups, hard-standings, accessible facilities, laundry, washing up areas and tourist information. The Appellant's sites participated in the Loo of the Year Awards sponsored by Initial Washroom Solution with the site network named in 2007 as the Overall UK Winner. The Appellant operated a conservation award scheme named after its President, David Bellamy OBE, which involved an independent assessment of its sites against a number of conservation criteria. In 2006 eight sites were recognised under the scheme. The sites were also assessed by Tourist Boards, including Visit Britain and the Automobile Association. The Appellant was committed to making its sites accessible to all. In 2002 over two thirds of its sites catered for campers with special needs.
- In 2008 the Appellant opened seven new club sites. The Appellant's capability to bring new sites on line was enhanced by two initiatives. First the Appellant's franchise activity enabled it to develop new places for members to camp without the high level of capital commitment previously incurred by the Appellant. The Appellant viewed this initiative as enabling it to support the growing membership levels with access to additional high quality sites in the United Kingdom.
- The second major initiative was the investment in Forest Holidays which was run as a partnership with the Forestry Commission. Forest Holidays sold pitches for tents and caravans on 21 sites and holiday lets on three cabin sites in woodlands maintained by the Forestry Commission. Forest Holidays had a separate corporate identity from the Appellant, organised as a joint venture company with the Appellant's Director General as Chairman of the management board. The Forestry Commission granted 75 year leases in its sites to the joint venture company. The Forestry Commission chose the Appellant as its long term partner following a tender process because of the Appellant's extensive holiday business management expertise and its readiness to invest capital to redevelop both the camping and cabin sites.
- The Appellant has invested £10 million in Forest Holidays, and held a 51 per cent interest in the joint venture company. The £10 million was raised by the sale and leaseback of the Appellant's headquarters and from mortgaging some of the club sites. The Appellant expected a significant return from its investment, particularly from the predicted substantial growth in the business over the next four years following the improvement and development of the existing sites. The revenue generated from the business since its formation in May 2006 has been £4.85 million. The Appellant also envisaged that the joint venture would lead to additional sites on Forestry Commission Land.
- Forest Holidays has its own policies and pricing structure which were not the same as those for the Appellant. Forest Holidays were sold to the general public. The Appellant's members were not required to pay the additional pitch surcharge when booking a Forest Holiday.
- The Appellant also offered a range of other camping and caravanning opportunities but these were restricted to members as they fell within the terms of the exemption from the 1936 and 1960 Acts. The exemptions fell within two categories: temporary sites and certificated sites. The Appellant was permitted to set up and supervise temporary sites for all campers for up to 28 days or up to five days in respect of caravans alone. Under the category of certificated sites the Appellant authorised landowners to establish sites which could accept up to five caravans or motor caravans plus as many tents as the area allowed. The Appellant did not charge landowners for the certification. The landowners, however, were required to pay the costs of establishing the sites but retained the income from site fees and earned commission on the recruitment of members for the Appellant. There were over 1,250 certificated sites in the United Kingdom.
- The exempted camping opportunities provided members with a different camping and caravanning experience from the club sites. The temporary camp sites were principally used for meets of the District Associations, and took place on locations with minimal facilities, often in farmer's fields or a place where a permanent camp site would not be permitted for planning reasons. They offered the club atmosphere and social interaction with fellow members. The certificated sites were generally small, offering limited facilities but having an individual character ranging from seclusion to a specialised facility, such as fishing or a paddock for a horse. The Appellant spent £700,000 per annum on its exempted camping activities.
- Carefree was the Appellant's travel service available only to members. Essentially Carefree arranged and sold overseas camping and caravanning holidays to members. The Carefree Winter Sun brochure submitted in evidence sold inclusive and non inclusive holidays. It offered rally and non-rally sites and individual worldwide travel. The rally sites offered a range of activities including bingo, quiz evenings, dinners, dances, walks and coach excursions to local places of interest supervised by the Appellant's stewards who were club members. Carefree generated income of £7.5million for the year ended 28 February 2007. Its operational costs for that year, however, exceeded the income by £300,000.
- Membership subscriptions yielded £5.7 million for the year ended 28 February 2007. In return for their annual subscription of £33 plus £6 joining fee, members received access to around 4,000 camp sites, meets and temporary holiday sites, the annual National Feast of Lanterns, Carefree travel services and an array of membership services. The Appellant sent members a range of publications including Camping and Caravanning, the club magazine, Out and About supplement listing details of member organised meets and events, Big Sites Book containing details of 4,000 camp sites in the United Kingdom, Your Place in the Country, the annual guide to all club sites, and a Member Services Guide highlighting the additional services to members. The other services offered to members included on-line booking, contact centre, technical information, insurance, RAC breakdown and recovery service, various financial services including credit card, legal helpline, store and camp facilities, caravan and motor-home manoeuvring courses and club regalia and clothing. The Appellant received £1.2 million in commission from specific members' services, such as insurance and breakdown cover.
- The Unit area represented the activities carried out by the Appellant's voluntary units. The Appellant had approximately 170 units in the form of District Associations, Regional Councils and Special Interest Sections. Mr Ramsbottom, National Council Chairman, estimated that about 10 to 15 per cent of the membership actively participated in the voluntary units. This area of the Appellant's activities was largely self financing. In the year ended 28 February 2007 it generated income of £2.46 million with expenditure of £2.43 million. Each unit kept their own accounts which were then consolidated in the Appellant's group accounts.
- The Appellant ran a Youth section, the membership of which was in decline owing to a shortage of youth leaders. The present membership stood at 800. The Appellant issued all youth members with a booklet entitled Fundamentals of Good Camping which provided advice on how to be a first class camper. The Appellant also organised a youth test, which if passed enabled a young member to camp without his parents. The Appellant did not set aside a specific sum of money for supporting the Youth section.
- Club members under the auspices of the Appellant's National Countryside Care Officer were involved in a wide range of conservations projects which in 2007 included supporting the Marine Conservation Society's Adopt - a - Beach initiative, land management projects on Club sites and a church conservation project. This work was carried out by volunteers. The Appellant provided no dedicated budget for conservation work.
- The Appellant was involved with the International Federation of Camping and Caravanning (FICC). The Appellant sends delegates every year to the FICC General Assembly. Members attended the Annual FICC rally which will be hosted by the Appellant in 2009 at Ipswich. Youth members escorted by leaders participated in the Annual International Youth Rally.
- The members and Appellant's members of staff organised a series of fund raising events for local and national charities, raising on average £250,000 per annum. The fund raising events were voluntary with either individuals or the District Associations taking the lead.
- The Appellant's website was open to general public except the members' area which essentially handled on-line bookings of sites and supplied members with an electronic copy of Out and About. The website provided a wide range of information about club sites, members' services, technical topics, and animal diseases. The Appellant made available a suite of information sheets about camping and caravanning ranging from Caring for Canvas, Wheels and Tyres for Caravans and Trailers, and Buying New and Second-hand Caravans and Tents which could be downloaded by members of the public. The Appellant sold copies of the Big Sites Book to the public for £15.
- The Appellant regarded itself as a significant player in the camping and caravanning industry, advising tourist authorities and government departments on the industry. The Appellant continued to work with DEFRA and the Association of Camping and Caravanning Exempt Organisations to ensure that the exemptions under the 1936 and 1960 Acts were not abused. The Appellant has been involved in lobbying activities with respect to other pieces of legislation which might adversely affect the interests of camping and caravanning community. Two recent examples given were the Countryside and Rights of Way Act 2000 which had the potential of removing the controls under the 1936 and 1960 Acts. The second example was the Licensing Bill where the Appellant was concerned about the potential licensing of entertainment arranged as an ancillary activity to camping.
- The Appellant sat on British and International Standards Committees for all matters relating to camping and caravanning. The Appellant was at the forefront of the campaign to cut down caravan theft, working closely with other bodies including the Home Office. Local Authorities referred to The Appellant's Model Standards for Touring Camp Sites when considering applications to license commercial camping sites.
- The Appellant has an active marketing department which carried out regular surveys to understand better the needs of its market. A recent example was the joint research project with the Outdoor Industries Association which identified the reasons why consumers took part in outdoor activities, the barriers to undertaking such activities, and their spending patterns on outdoors activities and equipment. The Director General acknowledged that the Appellant did not do anything directly to promote people's health. The Appellant, however, believed from the research carried out with the Outdoors Industries Association that its members were more active than members of the general public.
- Since 2001 the Appellant has held annually a National Camping and Caravanning Week. The Appellant's strategy for the 2007 week was that people would be more knowledgeable and informed about the Appellant as well as camping, caravanning and motor-home opportunities in the United Kingdom. The Appellant's members attended major leisure shows to promote the Appellant and enjoyment of the outdoors to all. In February 2008 the Appellant ran a campsite at the National Boat, Caravan and Outdoors Show.
- The Appellant viewed its campsites as destinations in themselves unlike commercial operators which preferred customers to stay and spend money within the confines of the campsites. The Appellant encouraged its members to support the local economy by providing minimal secondary spend opportunities on site and promoting local business through on site information centres. In 2004 the Appellant launched its Eat Local campaign which was promoted by the Appellant's President David Bellamy OBE to make campers aware of specialist food and drink producers that were local to each of the club sites, for example, farmers markets, farm shops, local pubs and other suppliers. The Appellants' 2007 members' survey of their expenditure whilst staying at a club site revealed that the daily amount spent by campers was £29.55 per unit or pitch excluding site fees with the highest expenditure on provisions from a supermarket.
- As part of its successful tender for Forest Holidays the Appellant commissioned a baseline audit of its sustainability from Ove Arup & Partners conducted in January 2005. The audit provided a snapshot of the Appellant's sustainability against set of four indicators which were not weighted. The report concluded that the Appellant showed quite a well-balanced performance in three of the indicators, environmental, societal and economic and that it was going well beyond legislation to meet best practice for touring facilities and organisations in a large majority of areas. Its weakest performance was in the efficient use of natural resources where the audit found that the Appellant had no recycling policy and no targets to reduce water or energy consumption. Under environmental sustainability the audit discovered variations in practice between sites. The audit recorded that the Appellant's turnover had grown from £3 million in 1991 to £24 million in 2004 and the membership had increased by 30 per cent during the last three years. The Appellant kept no records of expenditure on improving environmental and social performance.
Parties' Representations
Appellant's Representations
- The Appellant's counsel made two preliminary observations. The first concerned the phrase objects in the public domain found within Item 1(e) group 9 schedule 9 of the VAT Act 1994. Counsel submitted that the requirement public domain was not in the relevant provision of the EC Sixth Directive. Further it was not permissible for a Member State to add conditions for the availability of an exemption beyond those laid down by the Directive. In counsel's view public domain added nothing. If an activity was within the description of a supply of services by a non-profit making organisation with aims of a philanthropic nature, its aims were in the public interest and its supplies were exempt unless the exemption would cause distortion of competition.
- The second observation concerned the Respondents' grounds for refusing the voluntary disclosure which was that the Appellant did not fulfil a philanthropic function because its principal aim was to increase its membership and act for the benefit of individual members. Counsel observed that the exemption was restricted to membership organisations, the mere fact that they pursued functions associated with membership bodies did not as a matter of course prevent them from carrying out philanthropic activities.
- The Appellant endorsed the meaning of philanthropic as adopted in the Tribunal decision The Game Conservancy Trust v The Commissioners of Customs and Excise (2001) VAT decision number 17394 which was promoting the well being of mankind by serving one's fellow men.
- Counsel considered that the Tribunal should approach the disputed issue of philanthropic by deciding whether the Appellant's stated aims were philanthropic. The Appellant's activities acted as a check as to whether it was fulfilling its stated aims. Counsel contended that the Respondents' focus on the Appellant's activities was misplaced. The fact that some of the Appellant's activities were not philanthropic in themselves was irrelevant. The activities were the means by which the Appellant met its aims. The Appellant should not be judged on the means employed but on its aims. Counsel submitted that his interpretation was consistent with the decision of European Court of Justice in Kennemer Golf & Country Club v Staatssecretaris van Finaancien [2002] QB 1252.
- Counsel contended that the Appellant's stated aims were clearly philanthropic. None of the Appellant's objects as stated in its Memorandum of Association was membership orientated. They were intended to benefit all members of the community by promoting a love of the countryside and encouraging them to participate in healthy outdoor activities. The objects were central to the manner in which the Appellant had performed its functions over sixty years. The evidence adduced by the Appellant's three witnesses demonstrated that it fulfilled its stated objects on a day to day basis.
- The fact that the Appellant offered benefits to members did not make it a self interested organisation. The Appellant was precluded by the 1936 and 1960 Acts from offering the benefits of exempted camping to members of the public. The benefits amounted to supplemental activities which did not form the part of the Appellant's core activity. The Appellant's Objects started with everybody, encouraging members of the public to join so that they could attain a greater knowledge, love and care of the countryside and at the same time enjoy the additional benefits of membership. Everything the Appellant did was actuated by a benevolent disposition.
Respondents' Representations
- Respondents' counsel submitted that following the Kennemer decision it was necessary to consider all the facts in deciding whether the Appellant had a philanthropic aim. This approach required consideration not only of the stated aims of the Appellant but also what it actually did.
- Counsel considered the Appellant's argument about the potential incompatibility of domestic legislation with the Sixth Directive arising from the insertion of the public domain test an interesting legal point. However, in this Appeal it was not relevant. The sole issue in this case was whether the Appellant met the philanthropic requirement.
- Counsel took Appellant's Object A as its principal aim. He submitted that Object A was densely drafted and underpinned by the assumption that various identified benefits would flow from camping. In his view camping in itself was not philanthropic activity. Camping did not necessarily lead to the outcomes identified in Object A and make a camper a better person. People camp for different reasons. Camping in essence was a leisure time activity.
- The facts of this case demonstrated that the Appellant at its heart was a commercial enterprise focussed on the development and protection of its members' interests. The focus of its activities was on members not the public at large. The Appellant's core activity was income generation so that it could provide more camp sites for its members. The Appellant's main purpose was to obtain, manage, improve and promote camping and camp sites for the benefit of its individual members.
- The Appellant's evidence demonstrated that it conferred substantial benefits on its membership. The public service functions performed by the Appellant in respect of fact sheets, encouragement of youth members, international relations and conservation formed a minor part of its activities which did not attract a designated budget. Further the Appellant's evidence contained no evaluation of the impact that its activities had on the well-being of the general public, which contrasted with the evidence given in the Game Conservancy Trust case. The Appellant was not a body which fell within item 1(e) group 9 schedule 9 of the VAT Act 1994.
Reasons
Legal Principles
- The sole dispute in this Appeal was whether the Appellant's aims or objects were of a philanthropic nature. The parties accepted that the Appellant was non-profit making and that the exemption if applied would not distort competition. The requirement of public domain as stated in the domestic legislation was not a contentious issue because if the Appellant's aims were of a philanthropic nature, they were in the public domain.
- The parties agreed on the meaning of philanthropic as used in the Tribunal decision of the Game Conservancy Trust as connoting an aim or object of promoting the well-being of mankind by serving ones fellow men. Further they accepted the principle expressed in the same case that the motives of the members joining it or paying subscriptions to it was not relevant to the issue of whether a body has objects of a philanthropic nature.
- The parties considered that the approach adopted in Kennemer for determining whether an organisation was non-profit making was equally applicable to the issue of a body having objects of a philanthropic nature.
- Kennemer was about the interpretation of the non-profit making requirement in Article 13 of the Sixth Directive. The Court of Justice decided at page 1268 paragraph 22:
"the categorisation of an organisation as non-profit making must be based on all the organisation's activities".
- At page 1269, paragraphs 26 and 27 the Court of Justice explained that in determining whether an organisation was non-profit making regard should be had to the aim which the organisation pursued. This was a matter for the competent national authorities to decide taking into account the objects of the organisation as defined in its constitution and the specific facts of the case. In this respect the Court of Justice followed the advice of Advocate-General Jacobs at page 1261, paragraph 47:
"When assessing those aims, therefore, it is necessary but not sufficient to look at the organisation's express objects as set out in its statutes. It is also necessary, however, to examine whether the aim of making and distributing profit can be deduced from the way it operates in practice.
- The parties' application of the Kennemer approach to the facts of this case, however, was different. The Appellant considered that its objects should be deduced from its stated aims in the Memorandum of Association supported by an analysis of whether its activities realised those aims. The Respondents, on the other hand, based their evaluation of the Appellant's objects on the facts taken as a whole including the Appellant's stated aims and what it did in practice.
- I preferred the Respondents' approach which I considered to be in line with that applied in Kennemer as articulated by Advocate-General Jacobs of deducing the aim of the organisation not just from its express objects but also the way it operated in practice. The Appellant's approach placed too much emphasis on the stated aims in the Memorandum of Association and selected only those activities which it considered furthered those aims with the result that a partial view of the organisation was presented.
- I consider the Appellant's approach was derived principally from the Tribunal decision in Game Conservancy Trust rather than Kennemer. The Tribunal decided that a trust which essentially promoted the conservation and study of game species for the public benefit fell within the terms of the philanthropic exemption. The Tribunal in reaching its decision took an overall view of whole range of the Trust's objects and of the activities furthering these objects which appeared to correspond with the formula of words used by the Appellant to describe its approach in this case. The decision in Game Conservancy Trust was made before the judgment in Kennemer. Further the Tribunal emphasised earlier on its decision that if on examination of the evidence it transpired that the body has some other underlying aim or object that is more substantial than its stated aim, the body would be excluded from exemption which suggests that all the facts about the organisation should be considered not just the stated aims. Finally it was worth noting that the Tribunal in Game Conservancy Trust had before it substantial evidence of how the Trust's work and research benefited the public.
- The Respondents relied on the Tribunal decision in Civil Service Pensioners Alliance v Customs and Excise [2005] UKVAT V 18911. The Alliance campaigned for increases in the State pension and provided its members with a range of services. The Alliance sought exemption from VAT for its subscriptions on the alternative grounds that it was either a trade union or a body with objects of a philanthropic nature. The Tribunal rejected both grounds. In reaching its decision the Tribunal borne in mind the overall context of the exemption in Article 13A(1)(l) at paragraph 27 which referred to the Institute of Motor Industry v Commissioners of Customs and Excise (Case C -149/97) [1988] STC 1219 :
"The fact that Article 13A(1)(l) lists a whole series of adjectives describing the types of aims which those bodies may pursue (political, trade union, religious, patriotic, philosophical, philanthropic or civic) does not, in my view, mean that the Community legislature intended in that way to all organisations set up in the interests of their members provided that they were non-profit making and not likely to distort competition, as the Commission maintains. Rather it sought to determine which organisations of a non profit making nature and not likely to distort competition qualify for exemption from VAT".
- At paragraph 29 the Tribunal considered the application of the philanthropic exemption to membership organisations:
"And the fact that it was an organisation which primarily provided services to its members also meant that it did not fall within item 1(e) (philanthropic exemption) for that item was directed to organisations which did not primarily exist for the benefit of their members. The fact that some of its objects were expressed more widely than previously did not affect that. In pursuing the interests of pensioners more widely, the Alliance was still in fact pursuing the interests of its own members".
- The Tribunal in Game Conservancy Trust, however, at paragraph 67 stated that
"the fact that the body carries on business of making supplies to its members of membership services will not disqualify it from ranking as philanthropic".
- I conclude from the two Tribunal decisions that the mere fact that an organisation made supplies to members did not preclude it from ranking as philanthropic. Equally broadly phrased objects did not render the organisation philanthropic. Ultimately the two judgments reinforced the view that a decision on whether an organisation has objects of a philanthropic nature should be based on the whole facts with no single fact decisive.
- The final legal principle was that exemptions from VAT should be construed strictly, nonetheless the wording of the exemption should not be subject to artificial limitations.
Findings of Fact
- The Appellant's Memorandum of Association listed 17 Objects, nine of which from Object J onwards essentially set out its powers to achieve the Objects. Five of the remaining eight, Objects B to G, were focussed on aspects of camping and protecting the interests of campers, and in themselves did not connote philanthropic aims. Objects A, H and I were outward looking in that Object A aspired to educate all about the countryside, develop self reliance and promote physical health, whereas Objects H and I desired to promote international goodwill and understanding. The aspirations of Objects A, H, and I were to be achieved through the medium of camping and kindred activities.
- The Appellant's long term strategy and aims as expressed in its financial and mission statements were relevant in assessing the nature of the Appellant's stated objects. In both documents the Appellant stressed that it was a provider of camping opportunities and information with a view of having highly satisfied members.
- I conclude from my examination of the Appellant's published Objects in its Memorandum of Association that they were widely drawn with a focus on camping which gave the Appellant scope of how it exercised its powers. Specific Objects, A, H, and I had the potential for the Appellant to do good for all mankind. The Appellant's financial and mission statements, however, strongly indicated that the Appellant saw its predominant purposes as providing camping opportunities and having highly satisfied members.
- I found the Appellant's evidence in chief on its activities selective, and in places confusing particularly between the services available to members and non-members. The Appellant's witnesses in chief asserted that the Appellant's Carefree services and safe manoeuvring courses were available to non-members which was wrong resulting in a correction of their evidence. The Appellant's evidence essentially consisted of giving examples of activities which purportedly met the Objects in its Memorandum of Association. This approach presented a partial view of the organisation, and gave no indication of the priority given to these activities in relation to the whole by the Appellant. Also it was not apparent with some activities cited upon how they actually delivered the Objects claimed by the Appellant's witnesses.
- The Appellant produced a Sustainability Appraisal Report commissioned from Ove Arup and Partners Limited as an external validation of its activities. I was not satisfied that the report constituted an independent and full assessment of the Appellant's operations. There was no indication in the report of the outside persons, if any, consulted about the Appellant's performance. Further the report contained no quantitative analysis of the scope and impact of the Appellant's activities. The conclusions of the report, however, did not support the Appellant's case. The report was about sustainability not philanthropy. The report confirmed that the Appellant was a successful business in the field of touring camping facilities.
- I have categorised the Appellant's evidence of its philanthropic aims for the purposes of evaluation in the following six broad categories:
(1) Provision of accessible campsites.
(2) Youth work.
(3) Public information and events.
(4) International relations.
(5) Protection of the Countryside.
(6) Charitable works.
- The Appellant contended that its retention of exempt status under the 1936 and 1960 Acts enabled it to provide a wide range of camping opportunities which encouraged all to have a greater understanding of the countryside, develop self reliance and promote physical health. The Appellant adduced no evidence to establish that the widening of camping opportunities on their own generated the identified outcomes. The Director General accepted that the Appellant took no active steps to promote physical health. The reality was that the retention of its exempt status gave the Appellant advantages over commercial providers of campsites and enhanced its marketability since exempt camping could only be enjoyed by members.
- The Appellant has commendable policies in place for making campsites accessible to people with disabilities which go beyond its legal responsibilities under the Disability Discrimination Act. The policy, however, was described as Camping for all and directed at providing camping opportunities for people with disabilities not their education of the countryside. The existence of the policies demonstrated that the Appellant was a service provider which took its social and legal responsibilities seriously but that did not make it an organisation with philanthropic aims.
- The Appellant's work with its youth members although valuable played a minor part in its activities. There were only 800 youth members out of a membership of 400,000. The Appellant did not provide a dedicated budget for its youth work, and expected its youth section to deliver a return on its activities. The Appellant adduced no evidence of active campaigns to increase the youth membership. The Appellant suffered from a shortage of youth leaders, which indicated that the commitment to youth work within the organisation was not strong. The booklet, Fundamentals of Good Camping, issued to all youth members gave advice on responsible camping.
- The Appellant's public information and events activities were on the whole carried out as an adjunct to its membership operations and formed an insignificant part of its activities. The National Camping and Caravanning week and its attendance at shows and exhibitions were undertaken principally to increase its membership. The Appellant's lobbying in respect of Acts of Parliament was directed at protecting the interests of its members, in particular preserving the benefits of exempt status under the 1936 and 1960 Acts of Parliament. Likewise the Appellant's participation in various national bodies on caravan crime and British Standards was about furthering members' interests.
- The Appellant's research studies on Outdoor Activities and Spend in Local Communities presented in evidence were in essence market research and public relations projects. They were not scholarly pieces of work which advanced the knowledge of mankind. The Appellant supplied the public with limited information which had already been prepared for its membership. The information comprised access to its website which on the whole espoused the benefits of membership, 16 data sheets about specific camping and caravanning topics and up to date information about animal diseases. The Appellant shared with local authorities its technical manual and standards for camp sites. There was no evidence that the Appellant did something extra for the public. Further the Appellant committed minimal resources to the technical aspects of camping and caravanning employing two members of staff for technical enquiries compared with 60 members of staff at its call centre handling booking and membership enquiries.
- The Appellant contended that Carefree promoted international understanding by providing members with camping opportunities overseas. The Carefree brochure submitted in evidence, however, demonstrated that Carefree was no more than a travel service offering inclusive or non-inclusive overseas camping holidays to members with no expressed aspirations to promote international understanding. The club holiday rally camps ran social programmes for visiting campers. The programmes as described in the brochure had a distinctive UK character and were co-ordinated by stewards who were Club members. The Appellant sent a delegation of volunteer club members to the annual congress of the International Federation of Camping and Caravanning, and was represented on the technical committee for the Federation. The Appellant hosted international rallies which appeared to happen only occasionally after a space of several years. The Appellant was not forthcoming about the extent of involvement with the Federation, and the level of resources committed to it. I concluded that the promotion of international understanding and goodwill was not actively pursued by the Appellant and operated at the margins of its activities.
- The Appellant relied upon its Countryside Care Project to demonstrate its commitment to the preservation of the countryside. The evidence revealed that the Countryside Care Project was dependent upon individual Club members giving their services voluntarily. The Appellant did not commit resources to the project. Thus the project was an initiative of individuals not a core activity of the Appellant.
- The Appellant considered that it had a strong environmental policy which had been given prominence by the David Bellamy conservation awards. The Sustainability Appraisal Report commissioned from Ove Arup and Partners Limited found variations in practice between the Appellant's Club sites in their implementation of the environmental policy. Further only eight Club sites were awarded the David Bellamy conservation award in 2006. The Appellant had no recycling policy and no targets to reduce water or energy consumption.
- The Eat Local Campaign was another example cited by the Appellant supporting its aim to preserve the countryside. The Appellant, however, adduced no hard evidence of the steps taken to change the shopping behaviour of campers. The Appellants' 2007 members' survey of their expenditure whilst staying at a club site revealed that their highest expenditure was on provisions from a supermarket which ran counter to objectives of the campaign.
- The Appellant submitted that its partnership with the Forestry Commission to renovate and improve the Commission's sites was done in pursuit of its Object of protecting the countryside. The National Councillors' Report and Financial Statements dated 28 February 2007, however, portrayed a very different motivation for entering the partnership which was that the Appellant expected to make a significant return on its investment and, new sites would be opened up on Commission land. Further the Appellant was chosen as the partner because of its extensive holiday business management expertise and its readiness to invest capital to redevelop both the camping and cabin sites.
- The facts found showed that the Appellant had no coherent and concerted aim of protecting the countryside and sustaining the environment. Their landmark policy of the Countryside Care Project was entirely dependent upon the voluntary actions and choices of individual club members. The Appellant's partnership with the Forestry Commission was motivated by business considerations.
- The Appellant's evidence on charitable work comprised entirely of the actions of individual club members and members of staff which were not organised or co-ordinated by the Appellant's governing body or management team. The Appellant pursued no programme of charitable works, and there was no evidence that the Appellant itself made donations to charity from its income. The Appellant was not a registered charity.
- The Appellant's evidence of specific activities when analysed provides no compelling case that it was an organisation which pursued philanthropic aims. When the whole evidence about its activities was examined its claim to be a body with philanthropic aims was highly questionable.
- The Appellant was a very successful membership organisation. Its turnover had increased from £5 million in 1990 to £36 million in 2007 whilst its membership rose from 13,000 in 1950 to its present complement of around 400,000 with a 30 per cent increase between 2001 and 2004. The Appellant was well managed using sound commercial practices with an excellent reputation for customer service. The Appellant's call centre was awarded the title Best Contact Centre Under 50 Seats in Europe at the 2006 European Call Centre Awards.
- The Appellant's business was split into five operating units: UK Club Sites, Carefree, Membership, Member Services and Unit Activities/Other with each operating unit expected to provide a return year on year. The overwhelming majority of its revenue was applied to the operating costs of the sites and membership services. In 2007, 88 per cent of its operating costs were incurred on sites and membership services with the remaining 12 per cent devoted to administrative expenses, which emphasised its commitment to having highly satisfied members.
- The Appellant re-invested surplus income in better facilities and services to members. During the last ten years the Appellant spent over £30 million on improvements to club sites and on acquisitions with seven new sites opening in 2008. Most club sites were fully equipped with toilets, showers, electric hook-ups, hard-standings, accessible facilities, laundry, washing up areas and tourist information. The membership profile with only 10 to 15 per cent actively involved in the District Associations and the expansion in membership placed enormous demands on the site network. The Appellant developed innovative ways of meeting the increasing demand. The Appellant's franchise activity enabled the development of new sites for members without the usual investment of capital. The Appellant's partnership with the Forestry Commission not only opened up existing sites previously ran by the Commission but also the possibility of new sites. The Appellant used its powers as an exempt organisation under the 1936 and 1960 Acts to certify sites which made available a wide network of small distinctive sites to its membership. The Appellant as a result of its activities was the second largest operator of camp sites in the world.
- The Appellant supplied its members with regular publications which included the Big Sites Book containing details of 4,000 camp sites but giving prominence to Club sites with one page spreads and Place in the Country, the annual guide to Club sites.
- The Appellant offered an array of member services which included Club Care the leading insurer for caravans, motor-homes, and tents, vehicle breakdown and a range of financial services. The Appellant arranged fee paid courses on manoeuvring motor-homes and cars towing caravans or trailers for its members They provided facilities for members to store their caravans when not in use. The Appellant ran a dedicated overseas travel service for members and gave advice on a whole range of technical matters to do with camping and caravanning. The Appellant also sold caravan holiday homes to its members.
- The Appellant's staff resources were directed at supporting the site network and membership services. The Appellant employed over 200 members of staff on the camp sites. The overwhelming majority of the 180 administrative staff was engaged on membership services. Just two members of staff were employed as technical officers.
Conclusions on Findings of Fact
- I conclude from my examination of the Appellant's published Objects in its Memorandum of Association that they were widely drawn with a focus on camping which gave the Appellant scope of how it exercised its powers. Objects, A, H, and I had the potential for the Appellant to do good for all mankind. The Appellant's financial and mission statements, however, strongly indicated that the Appellant saw its predominant purposes as providing camping opportunities and having highly satisfied members.
- I conclude from the evidence on the entirety of the Appellant's activities that its energies and resources were directed at providing an expanding network of high quality camp sites open to members and non-members alike, a range of other camping opportunities restricted to members, and excellent membership services. The Appellant's works on public information were narrowly focussed on issues of concern to members and formed part of its strategy to attract new members. The Appellant had commendable policies in place for the environment and accessibility for all. The policies, however, were not aims in themselves but supported the provision of high quality camp sites and were no different from policies found in socially responsible service organisations. The Appellant did good work with its youth members and with the International Federation of Camping and Caravanning but this work existed at the very margins of its operations with no dedicated resources. The Appellant was not involved in fund raising for charities and countryside care projects. These activities were done by club members and employees of their own volition without direction or resources from the Appellant. The Appellant adduced no evidence of the quantitative and qualitative benefits of its activities for the countryside, the promotion of good health and self reliance, and international goodwill and relations.
- Having considered the Appellant's expressed objects in its Memorandum of Association, financial and mission statements, and the entirety of its activities I hold that the Appellant's aims were to provide a wide range of camping opportunities and membership services and to have a highly satisfied membership. There was no evidence that camping itself promoted the well-being of mankind. Camping was a leisure time activity. The Appellant's aims were directed at its membership rather than mankind in general.
Decision
- I find that the Appellant's aims of providing a wide range of camping opportunities and membership services and having a highly satisfied membership did not connote an aim or object of promoting the well-being of mankind by serving ones fellow men. Thus the Appellant was not a body which has objects of a philanthropic nature within the meaning of item 1(e) group 9 schedule 9 of the VAT Act 1994. I, therefore, dismiss the Appeal, and make no order for costs.
MICHAEL TILDESLEY OBE
CHAIRMAN
RELEASE DATE: 14 May 2008
MAN/
