EU law trumps HMRC for charity fundraising event

14 January 2025

The 166th Great Yorkshire Show will be run this summer by the Yorkshire Agricultural Society, a charity established in 1837 to champion the interests of farmers in the North of England. While UK VAT law includes an exemption for admission to a charity fundraising event, HMRC decided that VAT should have been charged for the 2016 Show as the Society did not meet all the necessary conditions. 

The Society fought HMRC on this point, arguing HMRC’s interpretation of the conditions was too narrow, and that UK law went beyond what the EU allowed when setting conditions for the exemption.

What’s the issue?

EU VAT legislation provides that all member states must treat income from charitable and qualifying body fundraising events as VAT exempt. The UK enacted this legislation by stipulating the main tests that must be met before exemption was granted. 

HMRC argued that the UK’s conditions for exemption were not met as the Show’s ‘primary purpose’ was not raising money. Even if it was, HMRC argued that the Show was not primarily promoted as a fundraiser. HMRC took the curious stance that an event can only be exempt if it is organised for charitable purposes but not primarily for charitable purposes.

The Society’s problem with UK law

This article focuses on the Society’s argument concerning the promotion condition as it is most relevant to the interaction with EU law (it’s important to note that there were other points of contention here). As you would expect, it was widely understood that the Show was a fundraising event, but the Society’s promotion of the Show also sought to further its charitable objectives. This led HMRC to decide that the admission fees couldn’t be VAT exempt. 

The Society argued that EU law does not specifically identify any condition concerning the promotion of a fundraising event when setting out the scope of the exemption. Therefore, even allowing for the discretion in implementation permitted to member states, UK law went too far. 

What did the court decide?

The court found that the promotion condition infringed EU law. To be VAT exempt, the Show’s promotion merely had to mention that it was a fundraising event – that did not have to be the primary purpose of the promotion. This loosening of the promotion condition meant that the Society was successful in its appeal. 

What does this mean for charities?

This case represents another milestone following the UK’s transition from EU member state to an independent nation. This round has gone to the taxpayer (and, indirectly, to the EU) but it is possible that the decision will be appealed. In addition, more cases on similar points of interpretation are likely to follow as significant doubt still abounds on the proper interpretation of UK VAT law during its transition from the EU. Now is the time for charities to consider their position to see whether they could also benefit from this decision where exemption was ruled out in the past.