In Marlow Rowing Club v HMRC [2020] UKUT0202, the Upper Tribunal (UT) found the club had a reasonable excuse for issuing a VAT zero-rating building certificate. It had sought counsel's opinion and did not need to also seek HMRC's opinion. 

The UT reversed the decision of the First Tier Tribunal (FTT), finding that the FTT had erred in law.

  • The rowing club constructed a building to be used by itself and other sports clubs. It also included a gym that offered membership to non-club members.
  • The club issued a certificate that allowed its builders to zero-rate their works. The building was intended to be used for charitable purposes within the meaning of the Value Added Tax Act 1994 Sch 8 Group 5.
  • HMRC found that the certificate was issued incorrectly and issued a tax penalty under section 62 VATA 1994.
  • The club appealed, claiming that it had a Reasonable Excuse. It had consulted extensively with counsel and its accountants and had acted on their advice.
  • At the time of the issue, the case of Longridge [2016] EWCA Civ 930 on a similar matter was pending an appeal by HMRC to the UT. (It later went on the Court of Appeal).
  • The club was aware that issuing the certificate was contrary to HMRC's policy at that time.
  • The FTT upheld the penalty and decided that the club did not have a reasonable excuse. It should have asked HMRC for its view. If it disagreed with that view it should have appealed and asked for the appeal to be stayed until Longridge had been decided.

The UT decided,

  • Taking into account that even though Marlow had tax and other professional expertise on its committee, it acted reasonably in seeking advice from VAT specialist accountants and counsel. Their expertise in relation to "charity VAT" and the state of the law following the FTT’s decision in Longridge was reasonable.
  • It also acted reasonably in relying on that advice in the way, in spite of omitting to seek advice from HMRC and in accordingly issuing the zero-rating certificate.
  • There was nothing to be gained in approaching HMRC for a view. Given the uncertainties of the Longridge appeal, HMRC would be in no better position to advise on what the correct position was as to the interpretation of the law than a professional adviser.

It found that Marlow had a reasonable excuse for issuing the incorrect zero-rating certificate.


Grounds for appeal: reasonable excuse
What is considered to be a 'reasonable excuse' when a taxpayer makes an appeal?

Incorrect issue of charitable building certificate
In Marlow Rowing Club v HMRC [2018] TC 6803, a tribunal held that the club did not have a reasonable excuse when it incorrectly issued a certificate for zero-rating a building for a charitable purpose.

Land & Property: Relevant residential & relevant charitable purpose
Property that is used for a relevant residential purpose or a relevant charitable purpose qualifies for special VAT rules.

External links

Marlow Rowing Club v HMRC [2020] UKUT0202