In Capernwray Missionary Fellowship of Torchbearers v HMRC, the FTT decided that the construction of a community hall for a charity was not zero rated under the relevant residential and relevant charitable purpose tests in VATA 1994 Sch 8 Group 5 item 2. In particular, the tribunal, having considered the CJEU judgment in Commission v Finland (C-246/08), found that the relevant charitable purpose test was not met because the charity’s activity of putting on courses in the hall for remuneration was an economic activity, even though this was not carried out with a view to profit. This decision is likely to lead to a general tightening up of the ‘economic activity’ test applied to charities providing educational, social and welfare services, where they rely on a non-business analysis to support zero rating of the building under the relevant charitable purpose test.
