Loughborough Students Union Upper Tier VAT Tribunal Decision Reasons for optimism for Students Unions? Last month, the Appeal against the First Tier VAT Tribunal decision on Loughborough Students Union v HMRC was heard and published. Background Loughborough Students Union (LSU) argued that its supplies of live entertainment were ‘cultural’ events which would have made the admissions income for all such events exempt of VAT. It further argued that its main Freshers and Graduation Balls were qualifying fundraisers, meaning that all the income derived from these events was also VAT exempt. The First Tier Tribunal and Upper Tier Tribunal decided that the cultural exemption did not apply because the Sabbatical officers were paid, which meant that Unions were not run on an essentially voluntary basis. Crowe Clark Whitehill does not agree with the reasons for the court’s decision but we do consider that the right decision was made. Fundraisers As some Unions are aware, HMRC are arguing that no Union event can qualify for exemption as a fundraiser as they consider that these events are not run primarily for fundraising purposes. HMRC take the view that these are primarily social events. The Upper Tier Tribunal has questioned HMRCs approach and has referred the case back to a different First Tier Tribunal to examine the UK rules on exempt fund raisers, especially whether the UK rules may be too restrictive. The Upper Tier Tribunal has also asked for the key ‘distortion of competition’ criteria to be examined fully. The findings on this point will be interesting, as in our experience HMRC has never questioned this, and we have difficulty in seeing how a Union could be distorting competition by running such events. In European Law, domestic legislators are allowed to set their own rules about when a fundraiser qualifies for exemption, but it appears that this only applies to ensuring that the events do not distort competition. As this undermines the main basis of HMRCs challenge to a number of Unions, we await with anticipation the next hearing, and will be sending out update alerts as required.