In HMRC v Caithness Rugby Football Club [2016] UKUT 354 the Upper Tribunal (UT) agreed with the First Tier Tribunal (FTT), that the construction of a clubhouse did qualify for zero-rating as it was intended for use as a village hall or similar.

The initial decision in Caithness Rugby Football Club v HMRC [2015] UKFTT TC04560 provides a useful summary of what constitutes a village hall or similar, and how the actual use of a building can be used to infer the intended use prior to construction.

Relevant legislation

Section 30(2) of the Value Added Tax Act (VATA) 1994 provides that goods and services in Schedule 8 are zero-rated.

Item 2 in Group 5 of Schedule 8 specifies: the supply in the course of construction of (a) a building...intended for use solely for...a relevant charitable purpose...of any services related to the construction...

Paragraph 6 of the notes to the above clarifies the use for relevant charitable purpose includes the use (b) as a village hall or similar in providing social or recreational facilities for a local community.


When the club completed the funding application form prior to building the clubhouse it estimated that 60% - 65% of its usage would be by the club.

Once completed, the actual use of the building was quite different.  It is used extensively by the community including by a dance school, for boxercise classes, by a choir, for pre-school children's activities and bowling.  Only about 10% of its use is by the club. 

The club acknowledge that the usage is not as predicted, but maintain that it was always intended that it would be available for others and that zero-rating is therefore due.

HMRC contended that at the time of the construction the building was not intended to be for broader community use but was mainly for the benefit of the rugby club and its members.

They also contented that as the executive committee which is responsible for management of the clubhouse could only include members of the rugby club, the local community could not direct how it would be used.  This precluded the clubhouse from qualifying as a village hall or similar.

Tribunal decision

The FTT broke down the requirements of Paragraph 6 into five parts, and commented on each as follows:

  • The requirement that there must be use by a charity is met.
  • The words intended for use refer to the intention at the time of construction, and the FTT accepted that the subsequent use of the building was not the same as was anticipated at the time of construction.  However, the FTT also concluded that although the extent of the use by groups other than the rugby club was not as predicted, it was always intended for use by others and there was never any intention to limit the use of others or to reserve the principal usage of the clubhouse for the rugby club.  The FTT decided that on the whole, the actual usage is therefore consistent with its intended use.
  • The building is used in providing social or recreational facilities.
  • The facilities are provided to a local community with about 85% of its usage being by residents of the immediate surrounding area.
  • The facilities are used as a village hall or similar because
    • The clubhouse is used by a significant number of diverse community groups
    • The clubhouse was constructed and is managed by a members' club on a non-commercial basis
    • The clubhouse has filled a gap created by the closure of a local town hall
    • Previous cases have established that a sporting pavilion or clubhouse is capable of being used as a village hall or similar
    • That the clubhouse is managed by one of the groups that use it is not decisive
    • The majority of events at the hall are not organised by the rugby club
    • Any village hall can be let on occasion to a commercial or professional entity for an event without this altering its character and so the occasional use of the hall for business events, rather than for social or recreational events, does not preclude it from qualifying as a village hall.

Appeal to Upper Tribunal

HMRC appealed to the Upper Tribunal, arguing that in order for the clubhouse to be a "village hall or similar" it must be run by the local community.

The Upper Tribunal rejected this argument again finding in favour of the club.


FTT case reference: Caithness Rugby Football Club v HMRC [2015] UKFTT TC04560

UT case reference: HMRC v Caithness Rugby Football Club [2016] UKUT 0354 (TCC)

Contrasting UT case: New Deer Community Association v HMRC [2015] UKUT 604