19343
VAT – Unincorporated association – liability to register – supply of radio network or reimbursement of operator? – taxable supplies in excess of registration threshold – Appeal dismissed.

LONDON TRIBUNAL CENTRE					               

	A C NEWLINE CABS	Appellant

	- and -

	THE COMMISSIONERS FOR HER MAJESTY’S REVENUE & CUSTOMS	  Respondents

			Tribunal:	Adrian Shipwright (Chairman)
					Ruth Watts Davies FCIPD, MHCIMA

Sitting in public in London on 23 September 2005

The Appellant did not appear

Mr Robert Kellar instructed by the Acting Solicitor for HM Revenue and Customs, for the Respondents

© CROWN COPYRIGHT 2005

DECISION

Introduction
1.	This is an appeal by A C Newline Cabs, an unincorporated association, (“the Appellant”), against a decision of the Commissioners of Customs and Excise, as they then were, (“HMRC”), to register the Appellant for VAT with effect from 1 November 2002.  This was notified to the Appellant by letter dated 21 June 2004.
2.	The Appellant did not appear at the hearing.  Accordingly, the case proceeded under Rule 26 of the Tribunal Rules.  We note that the Appellant had courteously informed the Tribunal of the non-attendance in writing before the hearing date.
3.	We would point out that Rule 26 allows the Appellant to apply within 14 days.          If the Appellant has evidence or arguments which could lead to a different result we would encourage the Appellant, which does not have limited liability to take advantage of this for the benefit of its members.  However, we understand that since the hearing the Appellant has written to the Tribunal saying it wishes to withdraw its appeal.  Notwithstanding this we have decided to issue our decision as we have completed the process and gives the maximum flexibility to the parties.
The Issue
4.	The issue was whether the Appellant should be registered for VAT as from 1 November 2002.  This depended on what it supplied, the VAT treatment of those supplies and whether the Appellant had exceeded the registration threshold.
The Law 
5.	A person is required to be registered for VAT if that person makes taxable supplies in excess of the registration threshold.  In 2002 the registration threshold was £55,000.  A person is liable to register from the end of the month in which the value of taxable supplies for the preceding year exceeds the registration threshold (see paragraph 1 Schedule 1 VATA).  HMRC can register a person if that person’s taxable supplies exceed the threshold whether or not the person notifies HMRC (paragraph 6 Schedule 1 VATA).                      
6.	By section 94(2)(a)VATA the provision by a club, association or organisation (for a subscription or other consideration) of the facilities or advantages available to its numbers is deemed to be the carrying on of a business by the club, association or organisation.  Section 46 VATA provides for registration in the name of an association.
7.	By section 5 VATA anything which is not a supply of goods but is done for a consideration is a supply of services.
Evidence 
8.	A bundle of documents was produced by HMRC.  The bundle had not been agreed with the Appellant.  In the absence of the Appellant there was no objection raised to the admission of these documents.  No witnesses were called and no witness statements were supplied.
Findings of Fact
9.	We make the following findings of fact from the evidence.
The Appellant and its Constitution
(a)	The Appellant is an unincorporated association.
(b)	The Appellant is governed by a set of rules.  These provided (inter alia):
1.  Objects
The objects of the Association shall be:
(i)	To provide and operate Radio communication facilities for members of the Association so as to enable the members to render a better service to the public than otherwise.
(ii)	To stimulate and facilitate business through co-operation and exchange of information.
(iii)	To provide publicity by means of advertisement or otherwise so as to encourage the public to utilise the service of the members.
(iv)	To effect or assist in the settlement of disputes between members interest and between members and the public.
(v)	To function as a non-profit making organisation.
7.  Members’ Dues
(i)	In consideration of the Association providing radio and all other facilities each member shall pay a weekly due to the Association as decided upon by the Treasurer after consultation with the other members of the Management Committee.
(ii)	Each member shall be liable to pay to the Association further dues (in addition to that set out in (i) above) as may be decided necessary by the Treasurer after consultation with the other  members of the Management Committee.
(iii)	At the Treasurer’s discretion each member of the Association may be required to leave a specific sum of money in the Association’s Bank Account should the need arise.    

(c)	There are and were at the relevant times 12 members of the Appellant who each paid £90 per week.
The Appellant’s Business and Income
(d)	The members of the Appellant are self employed taxi drivers working in and around the Borough of Watford.  The members own their own vehicles.
(e)	The Appellant provides a [booking service], radio network, premises with a gaming machine and accounts service in respect of account customers to its members.  Account customers include a local branch of Marks & Spencer and the local Council.
(f)	The Appellant’s receipts include the payments it receives from its members.  Its members pay (and have paid at the relevant times) £90 per week to the Appellant.  It also includes income from the gaming machine.
(g)	This gives an annual turnover of at least £56,160 (£90 x 12 x 52).
(h)	All the supplies were supplies of services and not goods.
Radio Network and its Operation
(i)	The Appellant has no employees.  Each member takes it in turn to operate the Radio Network and is recompensed for his loss of earnings whilst operating the network rather than during fare paying passengers.
(j)	The operation of the network is the main activity of the Appellant and its availability the main benefit of membership of the Appellant.
(k)	There is no reimbursement of a member or other person involved here.
(l)	The provision of the radio network was in the course a furtherance of the Appellant’s business.
(m)	On the figures supplied by the Appellant, the Appellant’s turnover exceeded the registration threshold in September 2002. 
Submissions
10.	Mr Kellar, who appeared for the Respondents, very fairly and properly put the case for the Appellant on the basis of the information available to him as well as for HMRC.  We are grateful for this.
11.	The Respondents case was, in essence, that the Appellants were in reality making available a radio network for a consideration which meant that the registration threshold was exceeded in September 2002.  It was not distinguishable from Eastbourne Town Radio Cars Association v Customs & Excise [1998] STC 669 (“the Eastbourne Case”).  
12.	In more detail this was because:
(a)	The Appellant was deemed to be carrying on a business (even if it was not actually doing so) by virtue of section 94 VATA.
(b)	It made taxable supplies in the course of that business consisting of the provision of the radio network [and/or the benefits of membership] for a consideration.  These were all taxable supplies.
(c)	The turnover of the Appellant exceeded the registration threshold in September 2002 and had done at all the relevant times since.
(d)	Accordingly, the Appellant was liable to be registered at the relevant times.
13.	The Appellant’s case was that, in essence, the members’ payments were a kind of reimbursement of expense incurred by the Appellant on the member’s behalf.  It was somehow akin to the disbursements incurred by professionals such as solicitors on behalf of their clients.
14.	Accordingly, the Appellant would argue there were no taxable supplies made by the Appellant which was therefore not liable to register as its taxable supplies did not exceed the registration limit.
Discussion
Introduction
15.	The submissions raise three issues.  These are:
(a)	What was supplied?
(b)	Were those supplies taxable?
(c)	Was the registration threshold exceeded at the relevant time(s)?
We consider each of these matters in turn.
What was supplied?
16.	We have found as facts that the main activity of the Appellant was the operation of the radio network and that this was the main advantage of membership of the Appellant.  In our view, what was supplied was essentially the radio network.  This can be properly described in our view as the main benefit (ie facility or advantage) flowing from the membership of the Appellant.
17.	Accordingly, we find that the benefit of the radio network as a facility or advantage of membership was what was supplied by the Appellant to its members.  This is what was supplied.  (This is in line with the Eastbourne Case).
Were those supplies taxable?
18.	Anything done for a consideration which is not a supply of goods is treated as a supply of services.  A supply of services in the course of furtherance of a business attracts VAT at the standard rate unless it is zero-rated or exempt.  The supplies here do not fall within the categories of zero-rated and exempt supplies set out in Schedule 8 and 9 VATA.
19.	A transaction does not give rise to a liability to VAT if it is “outside the scope” of VAT.  An example of this could be where a person reimburses another person for expenditure by that other than for the benefit of the first person.  This is simply not the case here.  The analysis that the membership payments are made to “reimburse” the “lost earnings” of the person operating the radio network does not fit the facts.  The radio operator is paid to operate the radio network which is what gives the main benefit to membership of the Appellant.  The opportunity cost of the earnings that might have been earned had the operator been out in his taxi plying for hire may be influential in determining the level at which payment has to be made by the Appellant to procure the operator’s services.  There is no reimbursement involved here.  For the avoidance of doubt we find this as a fact.
20.	To give rise to a liability to VAT the supply must be made in the UK in the course or furtherance of the business carried on by the supplier.  There is no suggestion that the supplies are made outside the UK.  As noted above, by section 94(2) VATA the provision of the advantages or facilities of membership by an association such as the Appellant is deemed to be the carrying on of a business.  As the radio network was the reason for the existence of the Appellant its provision is in the course or furtherance of the Appellant’s business.  We have found this as a fact.
21.	Accordingly, we decide that the Appellant was making taxable supplies in the course on furtherance of a business.  The Eastbourne Case supports this.
Was the registration threshold exceeded?
22.	On the basis that the £90 per week paid by each of the 12 members is, as we have found, fully taxable then the Appellant’s annual turnover is [£56,160] which is in excess of the turnover threshold in 2002 of [£55,000].  The administrative charge and share of the gaming machine receipts would increase this.
23.	Accordingly, we find that the registration threshold was exceeded.  The remaining question is when was the registration threshold exceeded?  On the basis of the information supplied to HMRC by the Appellant the threshold was exceeded in September 2002.  We have found this to be the case as a matter of fact.  It follows that the Appellant should have been registered for VAT from November 2002.
Conclusion
24.	We find that:
(a)	There was a taxable supply of the benefit of the radio network as a facility or advantage of membership of the Appellant.
(b)	There was no reimbursement by one member of another but supplies by the Appellant giving rise to VAT liability.
(c)	The Appellant’s turnover exceeded the registration threshold in September 2002.
(d)	The Appellant was therefore liable to register in November 2002.  
25.	For these reasons we dismiss the appeal.  We make no order as to costs.

ADRIAN SHIPWRIGHT
CHAIRMAN
RELEASE DATE: 18 November 2005
LON/204/1853