Freemasons’ Subscriptions not VAT exempt

Subscriptions paid by members to some public interest bodies can be exempt. For example, Trade unions, Professional Bodies, and Trade Associations meeting certain conditions. There’s also a category of body which has “objects which are in the public domain and are of a political, religious, patriotic, philosophical, philanthropic or civic nature.”

The United Grand Lodge Of England (“UGLE”) is the governing body for the majority of Freemasons in England and Wales. It has had several attempts at arguing that its membership subscription fees are exempt from VAT on the basis that its main aims are all philosophical, philanthropic and/or civic.

However, the tribunals to date have sided with HMRC, deeming that a key aim of UGLE is to provide financial support (“Relief”) to members, or their dependents, in need of it. While UGLE is not itself a charity, the bodies that actually distribute relief ARE charities, and Counsel for UGLE argued that if the Charity Commission treated bodies distributing Relief to Freemasons as charities, the act of distributing relief to Freemasons must be philanthropic. The Tribunals decided that there is no requirement for VAT and Charity law to be aligned.

Rather, providing relief to those who have paid into the funds via their subscriptions was “self-insurance”, not philanthropy. This was not merely incidental to the provision of relief to the public at large, in fact a central tenet was that Relief was to be applied foremost to Freemasons and their dependants. In practice around 50% of the people who received relief were themselves either Masons or closely related to Masons.

UGLE was not therefore entitled to exempt its membership fees from VAT.

The case is an illustration that the normal rule for VAT is that supplies are standard-rated. If exceptionally, a taxpayer wants relief from VAT, the rules for that exemption must be interpreted strictly.