BB/19A/05 VAT—High Court decision: Church of England Children's Society
Business Brief, Issue 19. 10 October 2005
This Business Brief outlines the decision of the High Court in Church of England Children's Society (CECS)  EWHC 1692 (Ch) (Part V10) in favour of the charity, and how HM Revenue & Customs intend to apply the decision. HMRC have decided not to appeal.
CECS is a charity with a wide range of activities. To raise funds, it engages professional fundraisers to secure regular donations from members of the public. Those donating at least £5 per month receive a copy of the charity's newsletter three times a year.
The VAT Tribunal decided that—
— the fundraisers' fees related to the non-business activity of seeking donations, so the VAT incurred on them was not recoverable
— the newsletters were not zero-rated supplies of printed matter. However, they were deemed zero-rated gifts of business assets and input tax on their production and distribution costs was recoverable following the decision of the High Court in West Herts College  STC 1245 (Part V10).
CECS appealed to the High Court against the first part of the Tribunal's decision and HMRC cross-appealed on the second part.
High Court decision
The High Court decided that if funds raised by donation by CECS were used to fund its taxable business activities, it was entitled to recover related input tax. It followed the recent judgment of the ECJ in Kretztechnik AG v Finanzamt Linz (Case C-465/03) (Part V11). In that case, the ECJ ruled that, where