The recent Greenisland Football Club First Tier Tribunal case sheds more light on HMRC’s approach to zero rating for the construction of new ‘relevant charitable purpose’ (RCP) buildings.
The legislation provides for zero rating for such buildings, and defines RCP:
(6) Use for a relevant charitable purpose means use by a charity in either or both the following ways, namely—
(a) otherwise than in the course or furtherance of a business;
(b) as a village hall or similarly in providing social or recreational facilities for a local community.
HMRC also argued that Greenisland was operating a business, since the building generated income. This is a simple failure to understand a Village Hall. A Village Hall usually does generate income for room hire, from regular User Groups and often private bookings. This ‘business activity’ does not breach the RCP test in Note 6(b) above (Rental income does breach the RCP test in Note 6(a).) ie you don’t need to worry about any business use for a village hall.
if you need clearance, get a ruling from the HMRC Charities Unit.