The oldest Grand Lodge of Freemasons in the world has lost an appeal for VAT refunds of £2.83m for charges on membership fees as primary aim was not philanthropic
The Grand Lodge has an annual income of approximately £13m, with £9m of this coming from membership fees and room rental. The two claims related to 2014 and 2018 and totalled £2.83m in VAT refunds from membership fees.
As the largest representative body of freemasonry in the UK with 175,000 members, the Grand Lodge, which was founded in 1717, has net assets of £70m and employs 90 people, operating as a not-for-profit organisation.
Originally, the Grand Lodge appealed to the First Tier Tribunal (FTT) claiming that the organisation was exempt from the VAT charges under Article 132(1)(1) of Council Directive 2006/112/VAT (PVD). This exemption is applied to organisations whose aims consist of a philosophical, philanthropic or civic nature.
The tribunal dismissed the two claims for VAT periods 06/10–03/18, stating that the organisation had more than one ‘main aim’ and was not solely philanthropic.
The FTT said: ‘It does not matter whether the provision of relief is regarded as two aims, one philanthropic and one non-philanthropic, or, alternatively, a single aim which is a mixture of philanthropic and non-philanthropic activities. In either case, I find that UGLE had a main aim which was not “philanthropic” within Art 132(1)(l).’
At the Upper Tribunal, the judges said that ‘the FTT misdirected itself in law by failing to apply the ordinary meaning of the word and instead adopted a meaning of “philanthropic” which is too narrow’.
The Lodge claimed that its main aim was philosophical and all other aims should be considered as being ‘in service of that aim’. Owain Thomas KC argued that ‘relief is an integral part of the philosophical aim’.
In response, HMRC argued: ‘Although the appellant asserted in its skeleton argument before the FTT that its philosophical aim was more important than any other that was an assertion of fact, not an assertion of law. The pleaded case in its re-amended grounds of appeal was the opposite.’
The UT decided that if between 2010-18 the Lodge had one main aim consisting of being philosophical, philanthropic, and civic then the case would go in the Lodge’s favour. If not, the decision would fall the other way.
The appeal was dismissed by the Upper Tribunal, which concluded: ‘We consider there is a qualitative difference between organisations which raise and distribute funds for identified groups of persons and an organisation that raises funds from within the members that constitute that organisation with the aim of essentially re-distributing a large part of the funds (by way of benefits procured by them) back to some of those members and members’ dependents.
‘That cannot be considered to be philanthropic in the sense of benevolence to the world at large, a love of mankind, etc. We therefore reject the submission that the FTT applied too narrow an interpretation of philanthropic.’
An HMRC spokesperson said: 'We welcome the decision of the Upper Tribunal that United Grand Lodge of England’s membership income is standard rated for VAT purposes.'