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 CUSTOMSRespondents

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

1

DECISION

The Appeal

  1. 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

  1. 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

  1. 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”.

  1. 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

  1. 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

  1. The Appellant was the oldest camping and caravanning club and the second largest operator of camp sites in the world.
  2. 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.
  3. 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.
  4. 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.
  5. 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

  1. 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.
  2. 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.
  3. 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

  1. 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.
  2. 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.
  3. 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

  1. 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”.
  2. 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”.

  1. 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”.

  1. 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.
  2. 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.

  1. The objects as specified in the Memorandum of Association have not altered since their inception in 1947.

The Appellant’ Activities

  1. 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.
  2. The Appellant’s business was split into five different operating activities, which were UK Club Sites, Carefree, Membership, Member Services and Unit Activities/Other.
  3. 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.
  4. 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.
  5. 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.
  6. 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.
  7. 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.
  8. 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.
  9. 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.