The Upper Tribunal (Tax and Chancery Chamber) has dismissed the United Grand Lodge’s appeal against imposing VAT on its membership subscriptions.

Background: the proceedings before the First-tier Tribunal Tax Chamber

The United Grand Lodge of England is an unincorporated association of what might be termed “traditional” Freemasons. In United Grand Lodge of England v Revenue & Customs [2014] UKFTT 164 (TC) it appealed against HMRC’s decision of 6 April 2010 that its supplies to its members in return for their subscriptions were not exempt from VAT. The dispute related to output tax accounted for since 1977 [98].

Article 132(1) of the Principal VAT Directive 2006/112 on the common system of value added tax (which replaced Article 13A(1) of the Sixth VAT Directive 77/388/EEC) requires member states to exempt, inter alia:

“… the supply of services, and the supply of goods closely linked thereto, to their members in their common interest in return for a subscription fixed in accordance with their rules by non-profit making organisations with aims of a political, trade union, religious, patriotic, philosophical, philanthropic or civic nature provided such exemption is not likely to cause distortion of competition.”

The Tribunal conceded that the Freemasons’ Grand Principles of integrity, brotherly love and charity were intelligible and concerned important matters. It also noted that the Principles were taught in the language of allegory and metaphor and that there was a belief in the supernatural [125]. However, when tested against the criteria of belief in a supernatural being and the acceptance of conduct to give effect to that belief, it held that Freemasonry failed the test: it did not have “any significant aims of a religious nature” [130]. It did have aims of a philosophical nature [143]; however, given the proportion of charitable funds expended on masons and their dependents, the Tribunal concluded that not all the Grand Lodge’s promotion of charitable giving could be treated as having a philanthropic aim [156].

The Grand Lodge’s aims included both service to the community and fostering fellowship for its own sake and care for fellow-masons [170]. Whether or not its aims fell within Art 132(1) depended on the extent to which its other aims were minor or ancillary to the qualifying aims [171]: in short, however, the Tribunal decided that they were not. Even after 2000, when Freemasonry had become more outward-looking, the aims of encouraging fraternity, self-improvement and mutual care were still more than merely incidental or ancillary to the wider philanthropic, philosophical and civic aims of the Grand Lodge [173].

The appeal

The Grand Lodge appealed on two grounds:

• that there was no evidence that its aims had, in fact, changed in 2000 and, as a result, the FTT had been wrong in law to have concluded that the practice of Freemasonry had changed since 2000 and had become more involved in charity work for the benefit of non-Freemasons or dependents [6]; and

• that the FTT had erred in law in concluding that while the Grand Lodge had aims that fell within the exemption in Article 132 (1)(l) it also had “other aims” that were not insignificant or ancillary to the qualifying aims [7] – related to which was a claim that that the FTT had erroneously concluded that the charitable spending of the Masonic charities might to some extent be analogous to that of a mutual insurance company and, therefore, not wholly philanthropic [9].

The judgment of the Upper Tribunal

In United Grand Lodge of England v Revenue and Customs [2015] UKUT 589 (TCC) Asplin J concluded as follows:

• The FTT had not erred in law in its approach to the statutory question [60].
• The FTT had not erred in law in seeking to test the Grand Lodge’s aims to determine the proportion which fell within the categories of exemption and then to decide on the basis of its findings of fact whether those outside the categories were of sufficient magnitude to prevent the qualifying aims from being main aims [63].
• The FTT had come to conclusions on the evidence before them to which they were fully entitled to come and their conclusions were not perverse [66].
• There was no error in the way in which the FTT had inferred from the way charitable donations were applied that not all of the Grand Lodge’s promotion of charitable giving had a philanthropic aim [69].
• The FTT had been entitled on the evidence to find that only a small part of the Grand Lodge’s aims was of a civic nature: “aims of a civic nature must concern the relationship between the citizen and the State rather than citizens with each other” [70].
• The FTT’s conclusion that, though ritual for its own sake was now for the few it remained “an integral part of teaching Freemasonry and binding people together”, was not inconsistent with its conclusion that some part of the Grand Lodge’s aims was to promote Masonic ritual and ceremony [73].

Comment

In my original post I suggested that the Tribunal’s subsequent handling of the issue of “religion” appeared slightly ambivalent. On the one hand, it had concluded [126] that Freemasonry “just” fell short of meeting the definition of “religion”; on the other, it had supported its conclusion that the aims of Freemasonry were in part “philosophical” on the basis that if that conclusion were wrong “we would have found that ‘religious’ was wide enough to encompass the tenets of Freemasonry” [143] – to which my response was that the FTT was trying to have it both ways.

In her judgment on appeal, however, Asplin J preferred not to go there at all:

“[The FTT] concluded that the aims of UGLE do not include any significant aims of a religious nature. Nothing turns upon that part of the FTT Decision and I make no further mention of it” [2].

Which was, perhaps, the wisest course.