19807

Supply for a consideration - did the Appellant receive monies for granting Founder Membership - payment by “200 Club” - direct link between supply and monies - whether there was agreement which identified reciprocal obligations - whether reciprocal performance. Schedule 9 Group 9 VATA 1994 - whether Appellant non-profit making - whether objects in the public domain and philanthropic or civic in nature.

LONDON TRIBUNAL CENTRE

	Newport County AFC Social Club Ltd	Appellant

	- and -

	THE COMMISSIONERS FOR HER MAJESTY’S
	REVENUE AND CUSTOMS	Respondents

			Tribunal:	Charles Hellier (Chairman)
Angela West FCA

Sitting in public in Cardiff on 13 September 2006

Mr J Grierson of Alan Rashleigh & Company for the Appellant

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

© CROWN COPYRIGHT 2006

DECISION

1.	The first issue in this appeal is whether the Appellant supplied Life Membership for a consideration. If it did the second issue is whether that supply is taxable or exempt within Group 9 Schedule 9 VATA 1994.
2.	The Appeal is against an assessment in the amount of £3,616 plus interest made on 27 September 2005, and was calculated by reference to sums paid to the Appellant in consideration of which it is alleged that the Appellant granted Founder or Life Membership to a number of people.
3.	We heard oral evidence from David Hando, a director and the company secretary, of the Appellant, and from Michael Hanford, the officer of the Respondents whose visit to the Appellant gave rise to the assessment. We were also provided with copy documents; Mr Hando also produced two building society account books which we admitted in evidence notwithstanding that they did not appear to have been in the Appellant’s List of Documents.
4.	We find the following facts relating to the funding and formation of the Appellant:-
(1)	in the year 2000 Newport County AFC (the “”Football Club”) did not have a club house. Many football clubs rely on bar income in order to make ends meet. A group of supporters decided to attempt to get a club house built. They set up a “200 Club”. The idea was that 200 people would commit to make donations towards the building of a club house;
(2)	the advertisement of the 200 Club was mostly by word of mouth although there was a piece in the Football Club programmes urging people to donate and to become Founder Members;
(3)	the proposal was that each member of the 200 Club would give a suggested amount of £150. In the event  about 300 people contributed: some gave a bit less and some gave more; but the normal donation was £150. The total contributions totalled some £45,000.
(4)	a building society account was opened in December 2000 in the name of Mr S E Johnson and Miss A M Brown who were appointed officers of the 200 Club for the purpose of opening the account;
(5)	contributions were paid into the account throughout 2001. By 23 July 2001 the balance in the account was £33,506;
(6)	the 200 Club had no formal rules, but it was understood that the purpose of the contributions was to fund a club house. The members never met as a body;
(7)	the Appellant was incorporated as a company limited by guarantee on 2 October 2001;
(8)	the 200 Club paid out £2,000 for Architect’s fees in August 2001; and in late 2003, after the Appellant had contracted for the building of the Club House, and early 2004 substantially all the balance of its funds was paid to the Appellant;
(9)	the promotion of the 200 Club represented that those who made contributions would become Founder Members (Life Members) and would have their names inscribed on a board in the club house. No indication of the rights and privileges of Life Membership was given. Neither was it made clear in what body the Life Membership would be;
(10)	the Appellant contracted for the building of the club house which it now owns. It funded the construction with the contributions received from the 200 Club, with bank loans, and with other loans including loans from members;
(11)	the principle aim of those concerned in the management of the company in the period from its formation to date has been that its surpluses should benefit Newport County AFC. Other worthy and sporting causes were not ruled out but benefiting them financially would be the exception rather than the rule. Where non-financial benefit could be conferred on other causes (e.g. making the clubhouse available) the opportunity to do so was grasped but the principle beneficiary was always to be Newport County AFC.
5.	Articles 2 and 73 of the Articles of the Appellant provide that the directors of the company may make rules for the purpose of prescribing, inter alia, classes and conditions, and rights and privileges of membership, and that these rules may regulate the admission and classification of members, and the entrance fees, subscriptions and other payments to be made by members. Pursuant to this power we find that the “Rules” were adopted on 27 May 2003. The Rules are set out in a document entitled “Newport County AFC Social Club - The 200 Club; RULES”. The content of the document makes it clear that it is (at least predominantly) rules made pursuant to Article 73 and that it relates to the Appellant and not to the 200 Club. It is also clear that the “Newport County AFC Social Club” in the title is the Appellant.)
6.	The Rules prescribe five classes of membership:
“1.	Founder Members	-	Life Members who joined before the official opening	
2.	Life Members	-	Life Members who joined after the official opening	
3.	Annual Members	-	Members for a calendar year who make an annual donation on the Officers from time to time decide	
4.	Guest Members	-	signed in on a first come, first served basis as numbers permit. No payment required but donations invited.	
5.	Group Members 	-	Guest Members admitted as a group…”	

Later on the Rules provide that:
“Membership is open to all persons who support the objective of the Club, with the approval of the Officers and payment of a suitable donation.
“Life Members should present their membership cards to gain admission. Guest members should sign in, retain a receipt and show it as requested by the Officers”,

and later
“All Club Members are Members of the Company”.
7.	Under the heading “Dissolution” the Rules provide that if the number of Life Members falls below ten or there is a 2/3rds majority resolution to the following effect, the Officers shall , unless otherwise authorised, take steps to convert to money the Company’s assets which shall be disposed of by resolution of the Members, but that if there is no such resolution within 6 months of the earlier 2/3rds majority resolution shall be divided equally among the Life Members. (The provision is silent as to what happens in the absence of a disposition resolution in the case where membership falls below 10).
8.	Mr Hando told us, and we accept, that (i) the Appellant requests a £10 donation for annual membership and that no one has yet declined to pay; (ii) Guest members are required, unlike annual and Life Members to sign in; they are encouraged  to make a donation but there is no insistence on payment; (iii) there are about  300 Life Members (including Founder Members) and about 48 Annual Members; (iv) all the members of the 200 Club became Founder Members: and (v) some persons had been granted Founder Membership otherwise than because they had been members of the 200 Club.
9.	The Appellant’s objects are set out in clause 3 of its Memorandum of Association. The first two objects are:
“3.1 To promote football in general and Newport County AFC in particular, and other sports and pastimes, and to encourage social intercourse among the Company members.
“3.2 To establish and manage a club for the members of the Company and their friends, and generally to allow them the usual privileges, advantages and accommodation of a club.”
10.	There then follow other paragraphs including other objects which are broadly speaking ancillary to these quoted above.
11.	The Rules specify the following  “Objects”:
“To fund design, build and run a Social Club at Newport Stadium for the benefit of Members, guests, Newport County AFC, and the local sporting and general community,”
12.	Mr Hando told us that he and other members thought that the Club Rules and Company Memorandum made it clear that the Appellant is non-profit making in that any surplus is for the benefit of the football club and the community; but, to make the matter clear beyond peradventure, a new object was added before clause 3.1 at a recent General Meeting:
“The Company is non-profit making in that any surplus left over after maintenance and development of the building will be used to support the local community in general and Newport County AFC in particular.”
13.	We find the following facts: The Club House consists of a large lounge, a bar, toilets and a kitchen. It is used by Members and guests when Newport County AFC are playing at home and when youth games are played at the ground. At other times it is let out for wedding receptions, bar mitzvahs and christenings for a £50 charge (plus £25 towards bar staff; and let out without charge about twice a month to organisations such as local charities, local schools, the ladies Hockey club, and Newport Schools F.A. On the occasions when it is let out and the bar is in operation the profit from the bar accrues to the Appellant.
14.	From the accounts of the Appellant for the year to 31 October 2004 and the evidence of Mr Hando we find the following facts in relation to the financial activities of the company:
(1)	the company makes a gross profit from its bar and related activities;
(2)	the company’s overhead expenses include sums paid to Newport County AFC for the provision of administrative services;
(3)	after taking into account annual and other subscriptions the company made for the year ended 31 October 2004, and expects to make in later years, a modest surplus;
(4)	presently the main use of the surplus is to repay the company’s bank loan, although some help has been given  to Newport County AFC already. Once the bank loan is paid off the surplus is likely to be applied to help Newport County AFC, to expand the club, and to a lesser extent  for worthy objects in the local community. We think it fair to say that the primary purpose for the use of any surplus will be to help Newport County AFC.
15.	Finally Mr Hando told us that some of the loans made to the club were made on the basis that the lenders would receive a sum by way of interest which would be paid only if the company made a surplus out of which to pay it.
The First Issue: A supply for a Consideration
16.	Mr Kellar submits that Founder Membership was supplied by the Appellant for a consideration equal to the sums received by the Appellant from the 200 Club.
17.	Initially he put his case this way: a supply is made for a consideration if there is a quid pro quo; a sophisticated legal basis for a contract between the donors and the company is not a necessary condition for there to be a supply for consideration; the company would say it gave Founder Membership because that had been promised to the donors: that was enough; Founder Members were described as those who had “joined before the official opening”; there was reciprocal performance: the donors paid and in return got Founder Membership; the performance did not have to be contemporaneous to be reciprocal.
18.	In later discussions Mr Kellar advanced an alternative argument. He asks: on what basis did the 200 Club pay the monies it had collected to the Appellant? Were they paid gratuitously or on a basis reflecting what had been offered when donations to the 200 Club were sought? He says it must have been paid the basis that the Appellant would grant Founder Membership to the donors because that was what had been offered before they made their donations.
19.	Mr Grierson says that the Appellant came into existence only in October 2001. Prior to that there had been a loose association of individuals who had collected some £32k. That (and other) money was paid over to the Appellant but it was paid simply as a donation. It was true that there had been a loose promise that donors would receive the title Founder Member, but that promise had not been made by the Appellant because the Appellant had not been in existence when the promise was made. There was no legal relationship between the donations and the receipt of Founder Membership. The reality was that the donations were freely given without the expectation of any return. The title Founder Member was an honorific title, when the representation that donors would become Founder Members was made, the term did not carry any well defined specific meaning: that only came later when the Appellant was formed and the 200 Club members were granted membership rights in it. The rights and benefits attached to membership of the company were not on contemplation at the time the 200 Club Members paid their donations.
20.	In reply to Mr Kellar’s alternative argument, Mr Grierson says that the monies were paid by the 200 Club members in the hope that anticipation that they would be used to build the club. That was the basis on which the monies were paid to the Appellant - not in return for some nebulous grant of membership in the Appellant.
Discussion
21.	We should start by saying that the grant of Founder Membership by the company to the 200 Club members is clearly something which, if done for consideration, could amount to a supply. The recognition of a person as a member of the company, even if that membership confers merely the right to attend meetings of the company is something done, and something which could be done for a consideration. In this case the company also granted such members the right to enter the club without having to sign in.
22.	The question for us is whether the company granted those membership rights for a consideration. And, if so, whether that consideration was the totality of the receipt from the 200 Club, or whether it was only part of that sum.
23.	In Tolsma v Inspecter der Omzetbelasting Leeuwarden [1994] STC 509 the ECJ considered the question of when a service was supplied for a consideration. At paragraphs 13 and 14 the Court said:
“…a provision of services is therefore taxable only if there is a direct link between the service provided and the consideration received…
“14. It follows that a supply of services is effected “for consideration” within the meaning of art 2(1) of the Sixth Directive, and hence is taxable, only if there is a legal relationship between the provider of the service and the recipient pursuant to which there is reciprocal performance, the remuneration received by the provider of the service constituting the value actually given in return for the service supplied by the recipient.”
24.	In Town and Country Factors v C&E Commissioners [2002] STC 1263 the ECJ considered the meaning of the requirement that there be a “legal relationship” between the provider and the recipient of the service. In that case the provider of a “Spot the Ball” competition provided prizes and the participators paid to participate, but the rules of the competition provided that the obligations were binding in honour only.
25.	The Court noted first that it was common ground in that case that there was reciprocal performance between the organiser and the competitors even though there was no legal relationship between them in domestic legal terms. The Court said:
“21. It is clear, next, that adapting the approach of making the existence of a legal relationship in the Tolsma sense depends upon the obligations of the provider of the service being enforceable would compromise the effectiveness of the Sixth Directive, in that it would have the consequence that the transactions falling within that directive could vary from one member state to another because of differences which might exist between the various legal systems in this respect.”
26.	The Court found that a supply “effected for a consideration but not based on enforceable obligations, because it has been agreed that the provider is bound in honour only to provide the services, constitutes a transaction subject to VAT.”
27.	We note at this stage the words “because it has been agreed that the provider is bound in honour only”. The Court was not considering the case where the provider was bound in honour only otherwise than because of an agreement to that effect.
28.	We also note the Advocate General’s comments at paragraphs 38 and 39 of his opinion, that the existence of a “legal relationship” could not depend upon specific legal characteristics, and that “all that need be examined is whether the components of reciprocal performance are exchanged in a framework of agreements - even ones binding in honour only - from which it is apparent that there is a direct link between them”.
29.	From these authorities we take the proposition that for a supply to be for a consideration there must be a direct link between the supply and the consideration and that that is the case only where there is a framework of agreements (or some form of understanding or arrangement) which identifies that link, and the consideration is tendered, or exchanged, for the supply.
30.	It is clear to us that there was (and could be) no agreement or arrangement between the 200 Club donors and the Company pursuant to which those donors paid their monies to the account run for the 200 Club. The company was not in existence prior to October 2001; almost all the donations had been made before that date: there could not have been any agreement between the company and the donors under which the payments were made to the account of the 200 Club. There is nothing from which to deduce any reciprocity. There is no way in which those payments could be viewed as made “for”, or as being reciprocal upon, any action of the company.
31.	That leaves the question of whether, when the 200 Club account holders paid the monies to the Appellant, there was some form of agreement between the Appellant and those making such payment from which it is possible to identify a direct link between that payment and the grant by the company of Founder Membership so that it would be possible to say that the payment was “for” such membership.
32.	In C&E Commissioners v Church Schools Foundation [2001] STC 1661, the Court of Appeal considered whether grants made to that Foundation by a company it owned were consideration for a supply of improvements to the Foundation’s properties from which the company could benefit. Sir Andrew Morritt VC at paragraph 41 discussed Tolsma and Town and Country Factors and said:
“But in each case the formula applied by the Court was in explanation of, not in substitution for, the requirement that the supply must be “for” consideration. For example, a loan facility provided by a bank to a property company to use on a specific development gives rise to both a legal relationship, debtor/creditor, and reciprocal performance, drawdown/applications. There is a direct link between the carrying out of the development and the drawdown. But the development is not a supply of services “for” the loan; rather it is effected “with” the loan. It is not quid pro quo but quid cum quo. It is appropriate to apply both tests to the facts of the case to see if either of them is satisfied.”
33.	In his last sentence he is referring to the “for” test and to the “direct link” test developed in Tolsma.
34.	We also note that both Sir Andrew Morritt and Buxton LJ (who dissented)accepted that “merely to make a donation to a charity, or even for a specific purpose of a charity, would not constitute consideration for the performance by the charity of its normal charitable function”.
35.	Mr Kellar’s alternative argument was that the monies paid from the 200 Club account to the Appellant were paid on the basis that the 200 Club members would become Founder Members of the Appellant and that therefore those Memberships were granted in consideration for those monies.
36.	We had before us no direct evidence as to the capacity in which those holding the 200 Club monies acted when they paid the monies to the Appellant: whether they were acting as bare trustees for the 200 Club members, or whether as trustees of the accumulated fund on some other trusts.
37.	Given the relative informality of the 200 Club arrangements it seems most likely that the account holders were acting as trustees of the monies and, although it is not wholly clear, that they were holding each member’s contribution on trust for those member. As such the account holders would have acted on behalf of the members of the 200 Club in making the payments to the Appellant.
38.	Neither was there any direct evidence before us as to whether there had been any form of agreement or understanding between the account holders and the Appellant in relation to the payments to the Appellant.
39.	There were clearly personal links and a community of interest between the members of the 200 Club, the Appellant, and its directors. There would have been an understanding between them. That understanding in our view is capable of fulfilling the requirement for a legal relationship as expounded by the Advocate General in Town and Country, and it would be that “legal” relationship which needs to be investigated to see whether, under it, the money was consideration for the membership. But, on the evidence, it seems to us highly unlikely that it was.
40.	It seems to us most likely that the monies were paid over pursuant to the understanding that they would be used to fund the clubhouse. That at any rate would in our view have been the principle concern of all those involved. If the account holders had been asked “what are you paying this money for”, we have no doubt they would not have said “so that Appellant will grant, as we all understand it should, Founder Membership i.e. membership of the Appellant for Life”, rather they would have said: “so that the Appellant can build the clubhouse”.
41.	Could it otherwise be said that the grant of membership was in fact reciprocal to or for the payment of the monies? It seems to us that the answer is “No”. The monies were paid, the clubhouse was built. The attributes and granting of Founder Membership were addressed in May 2003. The Rules appear to grant that membership to the persons who were members of the 200 Club at or before that time. The grant was made before any payment to the company was made by the account holders: there is no indication in the Rules that it is conditional upon, or in consideration for a promise to make the transfer of monies to the Appellant. We find that the grant of Founder Membership was connected with, or was reciprocal to, the donor having donated to the 200 Club, not to the later donation by the 200 Club to the Appellant. We find that this is the case even where the 200 Club account holders held the monies in the 200 Club building society account on trust for the donors: whilst membership was granted because these people had stumped up the money-paying it to trustees in the expectation it would be paid for the club house; the granting of membership was a unilateral act of the Appellant connected with, but not part of any reciprocal arrangement which involved, payments to the Appellant.
42.	In other words whether we ask the question “what was the money paid for?”, or the question “what was the reciprocal performance envisaged by the framework agreements” the answer is not that the money was paid to the Appellant “for” membership and is that there was no reciprocal performance relating to membership envisaged by any understanding or arrangement between the Appellant and those making payment.
43.	We therefore conclude that the Founder Membership of the Appellant was not granted for the consideration of the monies donated to the 200 Club or their later transfer to the Appellant.
44.	For completeness although it was not argued before us we should note that neither do we regard the building of the clubhouse to be a service supplied to the 200 Club members in return for their monies. That is for reasons similar to those which motivated the Court of Appeal in Church Schools to say that a mere donation to a charity would not be consideration for the supply by the charity of its charitable works, but also because the monies were paid after the Appellant had entered into the building contracts: they were paid to fund the carrying out of the works, not “for” the Appellants agreement to carry them out. 
Group 9 Schedule 9 VATA 1984
45.	If we are wrong about whether or not Founder Membership was supplied for a consideration, it becomes necessary to consider whether that supply falls within Group 9 Schedule 9 VATA 1984. That group provides for the exemption of the following services:
“1. The supply to its members of such services and, in connection with those services, of such goods as are both referable to its aims and available without payment other than 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.”
46.	The supply of Founder Memberships (and the awarded right to admission without signing in) by the Appellant would therefore be exempt only if:
(1)	the Appellant is non-profit making;
(2)	the Appellant’s objects are in the public domain, and
(3)	those objects are of a philanthropic or civic nature.
(a)	Non-profit making
47.	In Kennemer Golf and Country Club v Staatssecretaris van Financien [2002] STC 502, the ECJ held that an organisation was non-profit making if it did not have the aim, such as that of a commercial undertaking, of achieving profits or financial advantage for its members; but provided that was the case the fact that it made operating surpluses even systematically did not affect its non-profit making status so long as those profits were not distributed to its members as profits.
48.	The Advocate General said that in assessing an organisation’s aims it was necessary to “look” at its express objects as set out in its statutes and also to examine whether the aim of making and distributing profit could be deduced from the way in which it operates in practice. He said:
“a non-profit making organisation… is one which does not have as its object the enrichment of natural or legal persons and which is not in fact run in such a way as to achieve or seek such enrichment.”
49.	In its judgment the Court did not expressly adopt the Advocate General’s language: saying that whether or not an organisation was non-profit making was to be determined “by having regard to the aim which the organisation pursues” and that it was for the national authorities to determine whether, “having regard to the objects of the organisation as defined in the constitution and in the light of the specific facts of the case”, the organisation satisfied the test.
50.	In Messenger Leisure Developments Ltd V HMRC [2005] STC 1078 the Court of Appeal considered whether a company (Developments) which was a wholly owned subsidiary of a group of companies was non-profit making. Developments had an objects clause which prohibited the distribution of profits to its members (save, after December 1999, in a winding up) and which required any surplus funds to be used for the sporting facilities of the company (or, prior to December 1999, other charitable or public sporting purposes).
51.	Jonathan Parker LJ said that in determining the “aim” which Developments was pursuing it was necessary to look at the transactions in their full factual context. He said that “the fact that an organisation systematically achieves surpluses which it retains for its own purposes may, depending on the context, demonstrate an “aim” which is far removed from “non-profit making”.” Developments represented an integral part of the commercial operation of its group; building up reserves in it was a clear advantage to the group; and the commercial nature of Developments “aim” in making the surpluses was clear.
52.	Arden LJ noted that Developments’ parent could with ease change its Memorandum and Articles to remove any restriction, cause it to be wound up, and (in liquidation or by dividend) extract the accumulated surpluses. That extraction she said could be a financial advantage for its shareholders. She said:
“96…Indeed, as Developments is a wholly owned subsidiary, the parent could pass a special resolution without any formality. Thus there is, and could be no funding by the Tribunal that [the restrictions currently in the Memorandum] could not be removed at some time in the future… The contingent entitlement to distributions of profits in these circumstances seems to me to be capable of being a financial advantage to which the members are entitled…
“98… I do not hold that (so far as companies incorporated in their jurisdiction are concerned) no company limited by shares can qualify as a non-profit making body… However as my Lord has pointed out , in this case Developments in part of a commercial group of companies. The relative fragility of the restrictions is not therefore a purely academic matter. It is a matter … relevant to take into account in evaluating the totality of the facts for the purpose of determining whether in reality the aim of Developments in this case was to make profits for its members.”
53.	Mr Kellar says that:
(1)	there was at the relevant time no clause in the Appellant’s Memorandum which prevented the distribution of profit to members. The Appellant is therefore in a worse position than Developments. Mr Kellar also suggested that the test out in Kennemer was that a company could be non-profit making only if both its constitution prohibited the return of surpluses to its members and the other facts showed a non-profit making aim; and
(2)	because the Appellant is a private limited company whose constitution may be amended by its members and which may be wound up by them. The observations of Arden LJ noted above applied; and
(3)	a number of clauses of the Appellant’s memorandum permit it to undertake activities such as carrying on businesses and investing its monies which are for financial gain, and it is not clear that any such gain must be retained as operating surplus. (That we note in passing would also encompass the bar operating surplus.)
54.	It seems to us that in determining the aims of an organisation Kennemer enjoins as to look at all the relevant factors. Among them are the formal objects of the entity as set out in its Memorandum; but they are factors among many. We see nothing in the judgment of the Court in Kennemer or the opinion of the Advocate General which suggests that a prohibition in the constitution is a necessary condition to be non-profit making. To the contrary the requirement to “have regard” to various factors suggests a broader balanced enquiry. The formal objects may be clear (as in Developments case) that surpluses are not to be distributed: if so that points towards non profit making; the objects may be clear that the company is to distribute its surplus to its members: if so it would seem conclusively to show that the entity’s “aim” could not be non-profit making (unless perhaps it acted ultra vires in all its relevant dealings); or the objects may be silent or equivocal - permitting by silence the distribution of profit but not making it an express aim of the company: in such a case it will generally be other factors which determine the “aim” of the company: the absence of a prohibition on distribution to members is not in our view conclusive that it is profit making: indeed if a prohibition was a necessary condition for a body to be non-profit making, the prohibition would have to be in extremely wide terms - prohibiting the delivery of any “financial advantage” to its members. Developments’ objects were not so prohibitory, and we take support from the observation that that fact was not conclusive in the Court of Appeal’s thinking. The appellant falls into the latter category: Thus we do not regard the matter as determined by the terms of its constitution. 
55.	Neither do we accept that merely because the Appellant is a limited company whose constitution may be altered at will by its members, it is inherently profit-making. Jonathan Parker LJ’s comments in Messenger on this issue were directed to the fact that, as a wholly owned subsidiary, Developments was an integral part of the commercial operation of the group to whose benefit the surpluses accrued. Arden LJ noted that the ability to remove restrictions on profit distributions in the constitution of a company gave rise to a contingent entitlement of the member to profit which was “capable” of being a financial advantage in the Kennemer sense. She did not say it was such an advantage. She went on expressly to say that she did not hold that “no company limited by shares… [could] qualify as a non-profit body, but said that, as Jonathan Parker LJ had pointed out, Developments was part of a group of companies and that therefore the relative fragility of the resolutions on the change in constitution was not an academic matter. It accordingly was a factor which was relevant in evaluating the totality of the facts. Its incorporation into the commercial objects of the group turned the “capability” into a pointer to profit making.
56.	(Arden LJ’s comments were directed to a company limited by shares; the Appellant is limited by guarantee. That difference neither dilutes the force of her comments nor makes them any more apposite to the Appellant.)
57.	The case of the Appellant, a company with 350 or so individual members, each with one vote, most of whom (given that 300 or so of them were members of the 200 Club) probably have some affection for Newport County AFC, it seems to us that the likelihood that the members would amend the constitution or require the company to be put into liquidation so that its assets and profits were distributed to them is remote. Factually the position is quite different from that of a wholly owned subsidiary. We do not see Messenger as compelling a conclusion in the circumstances of the Appellant that because it is a limited company its “aim” must be profit making. In the factual circumstances of the Appellant its limited liability corporate nature does not weigh in favour of its not being non profit making.
58.	Mr Kellar’s third point relates to the clauses in the Memorandum which permit profitable activities and which do not restrict the distribution of the profits therefrom. So far as concerns the lack of restriction on the distribution of profits we have dealt with that issue in paragraph 54 above. So far as concerns the nature of the other activities, we see no relevance in the point. A company trading in widgets, just as much as a company selling education, or second hand clothes in a charity shop can have a non-profit making “aim”. The issue is not how it makes its surplus, but what it aims to do with it.
59.	Mr Grierson submits that the aim of the company was to apply its surplus for the benefit of the community and Newport County AFC in particular: its members might derive pleasure and satisfaction from the support given to Newport County AFC but that was not a “financial advantage”. As a factual matter he says the aim of the company was not financially to advantage its members.
60.	We agree. On the evidence before us as the company existed at the time of the payments to it, and as it has been run up to the present day, it was clear that it had no aim whatsoever of providing any form of financial benefit to its members. Mr Hando related that there had been a heated discussion at the most recent AGM as  to whether surplus funds should be applied in helping Newport County AFC rather than in paying off the bank loan. There was nothing in that account or otherwise which gave even the slightest whiff of providing any financial benefit to members, quite to the contrary.
61.	The nearest thing to something which had an aim of financially benefiting members were the “profit sharing” loans mentioned at paragraph 15 above. But these were loans which bore interest only if there was a profit, not loans which had an interest rate which in substance extracted profit from the company. In any case Mr Hando’s unchallenged evidence, which we accept, was that no payment interest had in fact been asked for or made on these loans.
62.	Taking all this together we find that the Appellant was non-profit making.
(b) 	Objects in the public domain
63.	Mr Kellar drew out attention to the decision of the tribunal in The English Speaking Union of The Commonwealth (VAT decision number 1023). The chairman was Lord Grantchester. At page 9 he says of the words “public domain”:-
“In my judgement the words “objects which are in the public domain” are those aims and objects which are regarded as matter of concern and interest to the public generally as opposed to matter of advantage for the subscribers other than the right to participate in its management or receive reports on its activities.”
64.	We must apply the words of the statute: we find Lord Grantchester’s approach helpful but would add two clarifications. First Lord Grantchester speaks of public concern and interest. It seems to us that these words not limit the concern to national concern and interest. It is as much a matter of public concern that the citizens of Newport should have an adequate hospital as it is that the citizens of Wales should have adequate hospitals. “Public” does not carry with it a requirement for the matter to be of concern or interest to all or a substantial majority of citizens. Second, public concern or interest is not limited to issues of moral or artistic value. Sport is as much a matter in the public domain as opera, single mothers or good nutrition.
65.	Mr Kellar says that the object of the Appellant is to provide an exclusive social and recreational facility for fans of Newport County AFC, and that it cannot be contended that this is within Group 9, Schedule 9. He says that the community use of the club was purely an add-on. 
66.	So far as concerns the “public domain” requirement we do not agree. Sport is a matter of public interest and concern. Mr Hando told us, and we accept, that the average gate for a Newport County AFC match is 1000. This suggest that the fortunes of Newport County AFC are not a private matter. We find that this is a sufficiently wide interest to characterise the interest of Newport County AFC as a matter of public concern or as in the public domain.
67.	The Appellant’s principle aim we have found, was to serve the interest of Newport County AFC: that was an object in the public domain. We do not view the Appellant as an “exclusive” club: Mr Hardy’s unchallenged evidence was that anyone who signed in could become a guest member. The Rules limit that to a supporter of the objects of the Club, but there was no evidence that this was in practice enforced. The evidence before us was that this was a club open to all, not an “exclusive” club for the fans at Newport County AFC. Guest members probably included supporters of opposing teams. Even if its membership had been limited to fans of Newport County AFC that would not in our view prevent its object being in the public domain.
68.	Neither do we regard the additional objects in the Memorandum of the company as affecting this conclusion. They must be viewed as they were applied in practice. And Mr Hardy’s unchallenged evidence was to the effect that they were used principally for the benefit of Newport County AFC.
(c)	Philanthropic
69.	Mr Kellar helpfully drew our attention to the tribunal’s decision in Game Conservancy Trust LON 00/0450. The chairman was His Honour Stephen Oliver Q.C. In its decision the tribunal discusses the meaning of “of a philanthropic nature. At paragraph 65 the tribunal says:
“We approach this question with the following principles in mind. The first relates to the construction  of a term used in an exempting provision. The general rule is that exemptions are to be construed strictly (see SUFA (Case 348/87) [1989] 	ECR 1737); nonetheless the wording of the exemption should not be subject to artificial limitations (see Muys’ en De Winter [1997] STC 665 at 682 para 14 and Card Protection Plan [1999] STC 270 at 292). Second, the ordinary meaning of the term” philanthropic” connotes an aim or object of promoting the well-being of mankind by serving ones fellow men. This must be the stated aim as well as the real aim. The fact that the activities of the body in question may bring benefit to the public although not specifically designed to do so will exclude it from qualifying as philanthropic. Equally, if on examination of the evidence it transpires that the body has some other underlying aim or object that is more substantial than its stated aim, the body will be excluded from exemption. Third, the question of whether a body has objects of a philanthropic nature falls to be determined by reference to the objects of the body (i.e. this case the Trust) and not be reference to the motives of the members joining it or paying subscriptions to it. The Rotary International decision exemplifies this. There, it appears from the summary of facts, many members had joined for social reasons, i.e. to develop “acquaintance as an opportunity of service”: see the words of the First Objective.”
70.	The tribunal concluded:
“To summarise, we think that the Trust is a body of philanthropic nature. Taking an overall view of the whole range of the Trust’s objects and of the activities by which it furthers these, its aims can fairly be said to fall within the ambit of the promotion and well-being of mankind. Its activities are primarily directed at wildlife (which includes game of all species) and they serve to benefit the general community. Thus, taking a strict but unstrained view of the exemption words of item 1(e) of Group 9 to Schedule 9, we think that the Trust has established exempt status for its supplies to its members. On this basis the Trust is entitled to repayment of the tax wrongly accounted for on subscriptions for the relevant periods.”
71.	The overriding aim or object of the Appellant is as we have found at paragraph 14 above to benefit Newcastle County AFC. The question for us is whether this is philanthropic or an aim which promotes the well-being of mankind by serving ones fellow man. Supporters of Newcastle County AFC would surely say that is what the Appellant’s aim is: to benefit Newcastle County AFC is serve one’s fellow man. 
72.	Mr Grierson says that in the light of the other facilities provided freely to community groups the object of the Appellant are of a philanthropic or civic nature. He suggests that the test of philanthropy is whether the benefits are available to all (even if not used by all).
73.	In Kennemer the ECJ added at paragraph 18 of its judgment: “It must be remembered that the aims of Article 13A of the Sixth Directive is to exempt from VAT certain activities which are in the public interest.”
74.	The Appellant’s formal objects embrace more than merely the support of Newport County AFC, but it is clear to us both from the formulation of those objects and from the evidence of the approach of the Appellant to its objects that its principal object in 2003 was the support of Newport County AFC.
75.	Whereas a person’s aims might be regarded as philanthropic if the support of one football club was one among many of the objects of their generosity, it is more difficult to regard as philanthropic generosity principally aimed at one recipient, which generosity could, but in practice was not aimed to any comparatively significant extent at benefiting the general community. There is in our view an insufficient breadth of scope in the Appellant’s aims to enable them to be seen as truly philanthropic.
76.	Accordingly had we found that the Appellant had supplied Founder Membership for a consideration we would have found that that supply did not fall within Group 9 Schedule 9, and that it was therefore taxable.
Conclusion
77.	We allow the appeal. Our decision was unanimous.
78.	Neither party sought costs; we have decided not to award them: there were clearly some misunderstandings between the parties and some difficult questions: the issues were not immediately clear cut.

 Charles Hellier 
CHAIRMAN
RELEASE DATE: 12 October 2006

LON/2005/1107