The criteria for a building to be seen as a Relevant Charitable Property (“RCP”) have been diminishing over the years. If the building is RCP then the end user can issue a certificate to the main contractor which enables a significant amount of construction services to be zero-rated.
Back in 2013 a not for profit cricket club sought advice from HMRC as to whether they were able to issue such a certificate for a new pavilion.
In their response, HMRC said that they would not comment as all the necessary information to form an opinion was in the relevant public notices, but did go on to say:
“Providing the new pavilion meets the conditions set out, and it appears to do so, the construction work will be zero-rated for VAT purposes.”
So a certificate was issued, but when HMRC found out about the certificate it subsequently issued the club with a penalty equivalent to the VAT that should have been charged on the construction. Their reasoning being that the club should have known that although it was a not for profit club it was not a charity (it was a Community Amateur Sports Club or “CASC”) and should have known that meant it couldn’t get RCP status. The First Tier Tribunal agreed with HMRC. The Upper Tier reversed that decision and in doing so found that the First Tier had erred in law.
This highlighted two points; the first is that there are ongoing legal proceedings to establish if a CASC can be a charity for RCP purposes; the second that HMRC are likely to be even less forthcoming in providing any useful correspondence.
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