Value Added Tax

Buildings and construction ― definition of a relevant charitable purpose (RCP)

Produced by Tolley
  • 22 Dec 2021 18:49

The following Value Added Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Buildings and construction ― definition of a relevant charitable purpose (RCP)
  • When is a building used for an RCP?
  • When is a building used by a charity?
  • When is a building used for non-business purposes?
  • Buildings typically used for non-business purposes
  • Buildings typically used for business activities
  • When is a building a village hall or similar?
  • Buildings typically seen as similar to a village hall
  • Buildings typically seen as not similar to a village hall
  • Practical points for RCP buildings

Buildings and construction ― definition of a relevant charitable purpose (RCP)

This guidance note looks at the meaning of the term ‘relevant charitable purpose’.

Detailed discussion of the legislation and case law on an RCP is found in De Voil Indirect Tax Service V4.232BC.

When is a building used for an RCP?

Use for an RCP means use by a charity either (or both):

  1. for non-business purposes

  2. as a village hall or similarly in providing social or recreational facilities for a local community

VATA 1994, Sch 8, Group 5, Note 6

When is a building used by a charity?

The meaning of ‘charity’ in a VAT context is described in the Charities ― overview guidance note.

When is a building used for non-business purposes?

There is a long history of case law on whether activities are ‘business’ activities for VAT purposes. It is worth highlighting that just because activities do not make a profit they are not necessarily ‘non-business activities’. Therefore, charities can (and frequently do) have many business activities. Business and non-business for charities is explored in the Charities ― overview guidance note.

For example, in one influential case, the Court of Appeal decided that a charity which provided water-based and outdoor activities at a price that was flexed to customers’ means was acting ‘in the course or furtherance of business’. This meant that a new centre it was building was not being used for an RCP and zero-rating was not available for the

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