In Reverend Jane Taylor (t/a Asmill House Retreats) v Revenue & Customs (VAT – exemption – provision of spiritual welfare services as part of a retreat) [2021] UKFTT 405 (TC), Ms Taylor was director of Mill House Retreats and a self-supporting (ie non-stipendiary) minister in the Church of England. Her activities were supervised by the Church of England and she held Permission to Officiate in the Diocese of Exeter [1-7]. She operated Mill House Retreats as a non-profit making concern [10].

Article 132(1)(g) of the Principal VAT Directive (EU 2006-12) provides that the Member States shall exempt:

“(g) the supply of services and of goods closely linked to welfare and social security work, including those supplied by old people’s homes, by bodies governed by public law or by other bodies recognised by the Member State concerned as being devoted to social wellbeing;” [1].

Article 133 further provides that Member States may grant exemption to bodies other than those governed by public law, subject in each individual case to one or more of the following conditions: that they must not systematically aim to make a profit, that they must be managed and administered on an essentially voluntary basis by persons with no direct or indirect interest in the results of the activities concerned, that their prices be approved by the public authorities or do not exceed such approved prices or do not undercut similar services by commercial enterprises subject to VAT, and that the exemptions are not likely to distort competition to the disadvantage of commercial enterprises subject to VAT [12]. These provisions were incorporated into UK law by Item 9 of Group 7 (Health and Welfare), Schedule 9, VAT Act 1994, as follows:

“The supply by –

(a) a charity,

(b) a state-regulated private welfare institution or agency, or

(c) a public body

of welfare services and of goods supplied in connection with those welfare services” [13].

“State-regulated” is defined as “approved, licensed, registered, or exempted from registration by any Minister or other authority pursuant to a provision of a public general Act, other than a provision that is capable of being brought into effect at different times in relation to different local authority areas” [17].

Ms (or as the judgment annoyingly kept calling her, “Rev”) Taylor acknowledged that Mill House Retreats was neither a registered charity nor a public body. However, she argued that it was state-regulated for the purposes of the exemption in Group 7 or, alternatively, that it was entitled to exemption from VAT on grounds of fiscal neutrality [18]. Further, she contended that Mill House Retreats was state-regulated because it was regulated by the Church of England which, as the Established Church, formed part of the state [19]. She further argued that because she and her diaconal colleague, Ms Chitty, were ordained in and licensed by the Church of England and subject to its supervision, their activities were governed by the Canons and Measures of the Church of England. She further contended that Measures were primary legislation [20].

In the Tribunal’s view, the principal issue before it was whether Mill House Retreats was “state-regulated” within the meaning of Note (8) [27]. “State-regulated” was a defined term and Note (8) required that the regulation be by a “Minister or other authority pursuant to a provision of a public general Act” [29]. Measures of the Church of England were not public general Acts[31] and the reference to “Minister” in Note (8) was to “a Government Minister (including a minister in one of the devolved administrations), and not to a minister of the Church of England (or of any other denomination or religion for that matter)” [32].

The Tribunal concluded that the provision of spiritual welfare by Ms Taylor in the course of her Mill House Retreat activities was not an exempt supply for VAT because it did not fall within the scope of Item 9 [36]. Appeal dismissed [37].