“1. The following transactions shall be subject to VAT: … ( c ) the supply of services for consideration within the territory of a Member State by a taxable person acting as such; …”
“ 1. 'Taxable person' shall mean any person who, independently, carries out in any place any economic activity, whatever the purpose or results of that activity. Any activity of producers, traders or persons supplying services, including mining and agricultural activities and activities of the professions, shall be regarded as 'economic activity'. The exploitation of tangible or intangible property for the purposes of obtaining income therefrom on a continuing basis shall in particular be regarded as an economic activity. …”
“ 1. States, regional and local government authorities and other bodies governed by public law shall not be regarded as taxable persons in respect of the activities or transactions in which they engage as public authorities, even where they collect dues, fees, contributions or payments in connection with those activities or transactions. However, when they engage in such activities or transactions, they shall be regarded as taxable persons in respect of those activities or transactions where their treatment as non-taxable persons would lead to significant distortions of competition. … 2. Member States may regard activities, exempt under Articles 132, …, engaged in by bodies governed by public law as activities in which those bodies engage as public authorities.”
“ Exemptions for certain activities in the public interest 1. Member States shall exempt the following transactions: … (m) the supply of certain services closely linked to sport or physical education by non-profit-making organisations to persons taking part in sport or physical education; …”
“ Member States may make the granting to bodies other than those governed by public law of each exemption provided for in points (b), (g), (h), (i), (l), (m) and (n) of Article 132(1) subject in each individual case to one or more of the following conditions: (a) the bodies in question must not systematically aim to make a profit, and any surpluses nevertheless arising must not be distributed, but must be assigned to the continuance or improvement of the services supplied; (b) those bodies must be managed and administered on an essentially voluntary basis by persons who have no direct or indirect interest, either themselves or through intermediaries, in the results of the activities concerned; (c) those bodies must charge prices which are approved by the public authorities or which do not exceed such approved prices or, in respect of those services not subject to approval, prices lower than those charged for similar services by commercial enterprises subject to VAT; (d) the exemptions must not be likely to cause distortion of competition to the disadvantage of commercial enterprises subject to VAT. Member States which, pursuant to Annex E of Directive 77/388/ EEC, on1 January 1989 applied VAT to the transactions referred to in Article 132(1)(m) and (n) may also apply the conditions provided for in point (d) of the first paragraph when the said supply of goods or services by bodies governed by public law is granted exemption.”
“Refunds of VAT in certain cases. (1) Subject to the following provisions of this section, where— (a) VAT is chargeable on the supply of goods or services to a body to which this section applies, …, and (b) the supply, … is not for the purpose of any business carried on by the body, the Commissioners shall, on a claim made by the body at such time and in such form and manner as the Commissioners may determine, refund to it the amount of the VAT so chargeable. (2) Where goods or services so supplied to … the body cannot be conveniently distinguished from goods or services supplied to … it for the purpose of a business carried on by it, the amount to be refunded under this section shall be such amount as remains after deducting from the whole of the VAT chargeable on any supply to … the body such proportion thereof as appears to the Commissioners to be attributable to the carrying on of the business; but where— (a) the VAT so attributable is or includes VAT attributable, in accordance with regulations under section 26, to exempt supplies by the body, and (b) the VAT attributable to the exempt supplies is in the opinion of the Commissioners an insignificant proportion of the VAT so chargeable, they may include it in the VAT refunded under this section.
“ Sport, sports competitions and physical education Item No … 3 The supply by an eligible body to an individual of services closely linked with and essential to sport or physical education in which the individual is taking part.
“Islands or district council’s duties in relation to the provision of recreational, sporting, cultural and social facilities and activities. (1) Subject to subsection (2) below and to section 19 of this Act, a local authority shall ensure that there is adequate provision of facilities for the inhabitants of their area for recreational, sporting, cultural and social activities.”
“Islands or district council’s powers in relation to the provision of recreational, sporting, cultural and social facilities and activities. (1) The provisions of this section and of the following section are without prejudice to the duty imposed by subsection (1) of section 14 of this Act and are subject to subsection (2) of that section and to section 19 of this Act. (2) A local authority may provide or do, or arrange for the provision of or doing of, or contribute towards the expenses of providing or doing, anything necessary or expedient for the purpose of ensuring that there are available, whether inside or outside their area, such facilities for recreational, sporting, cultural or social activities as they consider appropriate.”
“(1) Without prejudice to the generality of their powers under section 15 of this Act, a local authority may, for the purposes of their functions under subsection (2) of that section— (a)provide entertainment of any kind; (b)maintain a body for the promotion of a recreational, sporting, cultural or social activity; (c)permit any facility provided by the authority under the said section 15 to be run by another person on such conditions (including conditions as to the charges if any)— (i)to be imposed on the person in respect of the rights thereby enjoyed by him; or (ii)which may be imposed by the person on members of the public for admission to, or use or enjoyment of, that facility, as the authority think fit; (d)use for the purposes of an entertainment provided, or a recreational, sporting, cultural or social activity provided or promoted, by them any facility (or any part thereof) provided by them under the said section 15; (e)charge for admission to any facility provided by them under the said section 15 or for admission to or participation in, and for any programme supplied at or in connection with, any such entertainment or activity as is mentioned in paragraph (d) above; (f)accept the right to manage and control a park devoted or partly devoted to public use from the owner of that park or from any other person entitled to transmit that right; (g)enter into an agreement with the owner of any park or with any other person whereby— (i)access to the park for the public is obtained or enhanced; or (ii)provision is made for management and control of the park by the authority; (h)let as a shop, stall or restaurant a building in a park under their management and control; (i)set apart some of any such park for any purpose which they consider appropriate having regard to their functions under the foregoing provisions of this section and under the said section 15; (j)do anything necessary to defend a public right in any park; or (k)conduct, either by themselves or in collaboration with a voluntary organisation or other person, a competition in connection with a sporting or recreational activity; and with regard to that competition— (i)paragraph (e) above shall apply as it applies to any such entertainment or activity as is mentioned in paragraph (d) above; and (ii)the authority may provide trophies and prizes. (2) Without prejudice to the generality of their powers under section 15 of this Act, a local authority may contribute— (a)by way of grant or loan towards expenses incurred, or to be incurred, as regards recreational, sporting, cultural or social facilities or activities by a voluntary organisation or other person, not being a local authority, in providing or maintaining such facilities (or, as the case may be, in providing or promoting such activities) if the authority have powers themselves, under the said section 15 or under the foregoing provisions of this section, to provide such facilities or activities; (b)by way of grant towards expenses incurred, or to be incurred, by another local authority in providing or maintaining any such facility or in providing or promoting any such activity; (c)by way of grant towards expenses incurred, or to be incurred, by a harbour authority (within the meaning of theHarbours Act 1964 ) in providing, maintaining, managing or improving a harbour which is used (or is to be used) wholly or partly for sporting or recreational purposes; or (d)towards the cost of maintaining a park owned by another person and to which the public are afforded access for recreation.”
“Local authorities’ duty to secure best value (1) It is the duty of a local authority make arrangements which secure best value. (2) Best value is continuous improvement in the performance of the authority’s functions. (3) In securing best value, the local authority shall maintain an appropriate balance among – (a) The quality of its performance of its functions; (b) The cost to the authority of that performance; and (c) The cost to persons of any service provided by it for them on a wholly or partly rechargeable basis. (4) In maintaining that balance, the local authority shall have regard to – (a) Sufficiency; (b) Effectiveness; (c) Economy; and (d) The need to meet the equal opportunity requirements.”
'Platinum, Gold, Silver and Bronze'
“Comparing the circumstances in which the person concerned supplies the services in question with the circumstances in which that type of service is usually provided may therefore be one way of ascertaining whether the activity concerned is an economic activity”
“[t]he contributions at issue in the main proceedings are not payable by each user and were paid by only a third of the users, with the result that they account for only 3% of the overall transport costs, the balance being financed by public funds”
“I have no doubt thatsection 45(1)(b) Environmental Protection Act 1990 [under which a waste collection authority has a duty if requested by the occupier of premises in its area to collect any commercial waste from the premises, to arrange for the collection of the waste….] is, or at least is capable of being, a ‘special legal regime’. This is demonstrated by consideration of a LA [ie local authority] which provides a commercial waste collection service only if requested to arrange for such collection by an occupier of premises and does so for a reasonable charge which, taking the provision of the service to occupiers generally, results only in cost recovery and no surplus”
“would be capable of enforcement if the local authority failed to ensure not only adequate provision of facilities in the sense of structures and equipment, but also failed to ensure that the inhabitants of their area were provided adequately with facilities. The inhabitants of a local authority area consist not only of the fit and able bodies, they also consist of persons who are subject to disadvantages whether physical, mental, social or economic. Adequate provision requires to be made for such people. Accordingly a local authority cannot for example point to private provision of leisure centres as satisfying the requirements of the statute when only provided by the private sector at an economic charge, they must do more and ensure that there are adequate facilities for people who cannot for social or economic reason make use of facilities supplied for profit which as a result are costly. A local authority may include such facilities as fulfilling part of their overall duty but require to fulfil the further duty of ensuring availability to the inhabitants of their area. This duty they could perform by running loss making social and leisure departments and funding these by way of direct grant or subsidy.”
“[52] Whether there is a supply of goods or services for consideration for the purposes of art 2 and whether that supply constitutes economic activity within art 9 are separate questions. A supply for consideration is a necessary but not sufficient condition for an economic activity. It is therefore logically the first question to address. It requires a legal relationship between the supplier and the recipient, pursuant to which there is reciprocal performance whereby the goods or services are supplied in return for the consideration provided by the recipient: see, for example, the judgment in Borsele at para 24. That is what is meant by 'a direct link' between the supply of the goods or services and the consideration provided by the recipient: see Borsele at para 26 and contrast Apple and Pear Development Council v Customs and Excise Comrs . There is no need for the consideration to be equal in value to the goods or services. It is simply the price at which the goods or services are supplied. This requirement was satisfied in both Finland and Borsele . [53] Satisfaction of the test for a supply for consideration under art 2 does not give rise to a presumption or general rule that the supply constitutes an economic activity. However, as Mr Puzey for HMRC pointed out, the Advocate General remarked in her opinion in Borsele at para 49, 'the same outcomes may often be expected'.”
“[54] Having concluded that the supply is made for consideration within the meaning of art 2, the court must address whether the supply constitutes an economic activity for the purposes of the definition of 'taxable person' in art 9. The issue is whether the supply is made for the purposes of obtaining income therefrom on a continuing basis. For convenience, the CJEU has used the shorthand of asking whether the supply is made 'for remuneration'. The important point is that 'remuneration' here is not the same as 'consideration' in the art 2 sense, and in my view it is helpful to keep the two terms separate, using 'consideration' in the context of art 2 and 'remuneration' in the context of art 9. [55] Whether art 9 is satisfied requires a wide-ranging, not a narrow, enquiry. All the objective circumstances in which the goods or services are supplied must be examined: see the judgment in Borsele at para 29. Nonetheless, it is clear from the CJEU authorities that this does not include subjective factors such as whether the supplier is aiming to make a profit. Although a supply 'for the purpose of obtaining income' might in other contexts, by the use of the word 'purpose', suggest a subjective test, that is clearly not the case in the context of art 9. It is an entirely objective enquiry. [56] In describing the relationship between the supply and the charges made to the recipients in the context of art 9, the CJEU has used the word 'link'. In Finland at para 51, the court concluded that 'it does not appear that the link between the legal aid services provided by public offices and the payment to be made by the recipients is sufficiently direct … for those services to be regarded as economic activities'. Likewise, in Borsele at para 34, the court adopted precisely those words in concluding that the provision of the school transport was not an economic activity. [57] Mr Prosser QC for the College submitted that whether there was 'a sufficiently direct link' between the services and the charge made was an important circumstance, while Mr Puzey submitted that 'direct link' does not feature in the analysis. [58] I regard this as a largely semantic point. The word 'link', whether 'sufficient' or 'direct', is used as no more than shorthand to encompass the broad enquiry as to whether the supply is made for the purpose of obtaining income. It is not a separate test, or one of the factors to be considered when addressing the central question. For my part, I think it is apt to cause some confusion to use the same word for both art 2 and art 9 and I have not myself found it particularly helpful or illuminating in considering whether there exists an economic activity. [59] Each case requires a fact-sensitive enquiry. While cases concerning the supply of legal aid services or school transport will provide helpful pointers to at least some of the factors relevant to the supply of subsidised educational courses, there is not a checklist of factors to work through. Even where the same factors are present, they may assume different relative importance in different cases. The CJEU made clear in Borsele at para 32 that it was for the national court to assess all the facts of a case.”
“… the scope of the term economic activities is very wide and … the term is objective in character, in the sense that the activity is considered per se and without regard to its purpose or results … An activity is thus, as a general rule, categorised as economic where it is permanent and is carried out in return for remuneration which is received by the person carrying out the activity …”
“30. Comparing the circumstances in which the person concerned supplies the services in question with the circumstances in which that type of service is usually provided may therefore be one way of ascertaining whether the activity concerned is an economic activity … 31. Other factors, such as, inter alia, the number of customers and the amount of earnings, may be taken into account along with others when that question is under consideration … 33. …first, … the municipality of Borsele recovers, through the contributions that it receives, only a small part of the costs incurred. The contributions at issue in the main proceedings are not payable by each user and were paid by only a third of the users, with the result that they account for only 3% of the overall transport costs, the balance being financed by public funds. Such a difference between the operating costs and the sums received in return for the services offered suggests that the parental contribution must be regarded more as a fee than as consideration … 34. It therefore follows from that lack of symmetry that there is no genuine link between the amount paid and the services supplied. Hence, it does not appear that the link between the transport service provided by the municipality in question and the payment to be made by parents is sufficiently direct for that payment to be regarded as consideration for that service and, accordingly, for that service to be regarded as an economic activity … 35. … second, that the conditions under which the services at issue in the main proceedings are supplied are different from those under which passenger transport services are usually provided, since the municipality of Borsele … does not offer services on the general passenger transport market, but rather appears to be a beneficiary and final consumer of transport services which it acquires from transport undertakings with which it deals and which it makes available to parents of pupils as part of its public service activities.”
“[75] Turning to the contentious issue of economic activity, both parties drew attention to factors taken into account in Finland and Borsele , while accepting that ultimately each case depends on its own facts. Those factors were, first, that in Finland and, to an extent, in Borsele , the charges paid were fixed by reference to the means of the recipients. Second, and as a necessary corollary, the charges were only partly fixed by reference to the cost of the service. Third, the total amount raised by charges was insubstantial, both in absolute terms and relative to the cost of the service. Fourth, in Borsele , the municipality did not offer services on the general passenger transport market and appeared more to be the final consumer of the transport services provided by the transport undertakings engaged by it. Fifth, other factors mentioned in those cases were a comparison of the supply in question with the circumstances in which the relevant type of service is usually provided, and the number of customers.”
“the subsidised fees made a significant contribution to the cost of providing courses to the students paying those fees, to the extent of some 25–30%.” (5) The fact that the Council does not aim (and has never aimed) to break even (let alone make a profit) on the provision of the facilities does not matter. That is a subjective factor only and must be ignored - see, for example, Wakefield College at [55], Longridge at [84], and Lajvér at [35]. (6) The fact that many users pay concessionary rates does not matter. Per Arden LJ in Longridge (at [93]): “The concessionary charges were also not an indicator against the existence of an economic activity because the economic activity springs from the receipt of income, not profit.” (7) The fact that the costs of providing the facilities for leisure, sporting and physical recreation are subsidised in large measure by grants from UK central government (see the evidence of Mr Fairley ([22(7) & (11)] above) and Mr Sheret ([21(17)] above)) does not matter. Per the CJEU in Lajvér (at [38]): “… the fact that the investments were largely financed by aids granted by the Member State and the European Union cannot have a bearing on whether or not the activity pursued or planned by the applicants in the main proceedings is to be regarded as an economic activity, since the concept of "economic activity" is objective in nature and applies not only without regard to the purpose or results of the transactions concerned but also without regard to the method of financing chosen by the operator concerned, which also holds true in relation to public subsidies.” (8) The fact that the leisure, sporting and physical recreation facilities are provided in fulfilment of statutory duties does not matter. Per the CJEU in Finland (at [40]): “It must first of all be stated that, in view of the objective character of the term ‘economic activities', the fact that the activity of the public offices consists in the performance of duties which are conferred and regulated by law, in the public interest and without any business or commercial objective, is in that regard irrelevant.”
“ 1. States, regional and local government authorities and other bodies governed by public law shall not be regarded as taxable persons in respect of the activities or transactions in which they engage as public authorities, even where they collect dues, fees, contributions or payments in connection with those activities or transactions. However, when they engage in such activities or transactions, they shall be regarded as taxable persons in respect of those activities or transactions where their treatment as non-taxable persons would lead to significant distortions of competition. …”
“According to [ Carpaneto No 1 at [15]], it is the manner in which the activities are carried out that determines the scope of the treatment of public bodies as non-taxable persons. In so far as that provision makes such treatment of bodies governed by public law conditional upon their acting 'as public authorities', it excludes therefrom activities engaged in by them as bodies governed not by public law but by private law. Consequently, the only criterion making it possible to distinguish with certainty between those two categories of activity is the legal regime applicable under national law.”
“21. The national court must, in accordance with the case law …, analyse all the conditions laid down by national law for the pursuit of the activity at issue in the main proceedings, to determine whether that activity is being engaged in under a special legal regime applicable to bodies governed by public law or under the same legal conditions as those that apply to private economic operators.”
“… bodies governed by public law act as public authorities when they engage in activities which, while fully economic in nature, are closely linked to the exercise of rights and powers of public authority ( Isle of Wight Council and Others , paragraph 31). …”
“69. … only activities carried out by a body governed by public law acting as a public authority are to be exempted from VAT. 70. The court has consistently held that such activities are activities carried out by those bodies under the special legal regime applicable to them and do not include activities pursued by them under the same legal conditions as those that apply to private economic operators. The court has also made it clear that the subject matter or purpose of the activity is in that regard irrelevant and that the fact that the pursuit of the activity at issue in the main proceedings involves the use of powers conferred by public law shows that that activity is subject to a public law regime (see to that effect, inter alia, judgment in Fazenda Pública v Câmara Municipal do Porto (Case C-446/98 )[2001] STC 560 ,[2000] ECR I-11435 , paras 17, 19 and 22). 71. In that context, the court has stated that the exemption provided for in the first subparagraph of art 13(1) of Directive 2006/112 covers principally activities engaged in by bodies governed by public law acting as public authorities, which, while fully economic in nature, are closely linked to the exercise of powers conferred by public law (judgment in Revenue and Customs Comrs v Isle of Wight Council (Case C-288/07 )[2008] STC 2964 ,[2008] ECR I-7203 , para 31).”
“[109] The preliminary issue is to be answered in the sense that, where an LA [local authority] is making supplies of trade waste collection services to business customers in its area and does so in the performance of its duties under s 45(1)(b) EPA 1990, the supplies are 'activities in which it is engaged as a public authority' within the meaning of s 41A(a) VATA 1994 and art 13(1). Whether an LA is in fact providing its commercial waste collection services under s 45(1)(b) is a matter to be determined on the facts of each case.”
“[103] I have no doubt that s 45(1)(b) EPA 1990 is, or at least is capable of being, a 'special legal regime'. This is demonstrated by consideration of an LA which provides a commercial waste collection service only if requested to arrange for such collection by an occupier of premises and does so for a reasonable charge which, taking the provision of the service to occupiers generally, results only in cost recovery and no surplus. It would appear that this is the position with North Lincolnshire Council. Indeed, TDC itself does not deny that an LA that is actually arranging a collection in response to a request under s 45(1)(b), and then levying a charge under s 45(4) for the reasonable costs of that collection, may be 'acting as a public authority'. [104] Since it cannot be said that s 45(1)(b) is not ever capable of constituting a special legal regime, it must follow, even on TDC's case, that whether any particular LA is acting as a public authority will depend on the facts relevant to that LA. As I have already observed, I do not know the detailed facts in relation to any particular LA to say which of the factors relied on by [TDC’s counsel] … might even arguably apply quite apart from the responses to those factors …. I do not even have the relevant details in relation to the activities of the LAs in whose areas TDC operates. Although this is not a matter relevant to the preliminary issue, I would have thought that, if TDC is to succeed in an application for judicial review of HMRC and HMT, it is essential for it to show that it is affected by the activities of those LAs. For all I know, each of those LAs is one where commercial waste collections are carried out only following a request and for a reasonable cost reflecting cost recovery and no surplus. [105] It is therefore impossible, even on TDC's case, to answer the preliminary issue with the answer 'No' (so that the VAT derogation does not apply) since there are at least some, and may be many, LAs who are not to be regarded as taxable persons in relation to supplies of commercial waste collection services. The answer, on TDC's case, would have to be 'it all depends'. [106] However, once it is accepted, as it must be, that s 45(1)(b) EPA 1990 is capable of constituting a special legal regime in some cases, then in my view any activities carried out by an LA pursuant to that special legal regime fall within the VAT derogation, subject always to the competition proviso. As the cases show, the only criterion making it possible to distinguish with certainty between activities as a public body and activities subject to private law is 'the legal regime applicable under national law'. I accept, of course, that not every activity carried on by an LA is subject to a special legal regime simply because some statutory basis has to be found for that activity. But once a legal regime has been identified as a special legal regime in accordance with the case law, it would defeat the purpose of that clear criterion—namely to provide a clearly and readily applicable test—to require national courts to enter into a further inquiry as to whether particular activities within that legal regime are entitled to the benefit of the VAT derogation. In the present case, the difficulty in drawing lines between what would, and would not, qualify for exemption is, I suggest, obvious. It is no answer for TDC to say (without any, or any adequate, evidence I add) that, wherever lines are to be drawn, there are many cases which exhibit all of the factors identified by [TDC’s counsel] … and which should not, on his approach, attract the exemption. …”
“6 … The first, Ground 1, is that the Upper Tribunal erred in law in concluding that Waste Collection Authorities that chose to engage in providing trade waste collection services in competition with private sector providers are (or at least may be) performing their duty under section 45(1)(b) of the EPA 1990. 7 It is pointed out in support of this ground that section 45, as I will refer to it, does not require local authorities to collect waste themselves. All that it requires of them is, on request, to arrange for the collection of commercial waste and it is then under a statutory duty to levy a reasonable charge for doing so. Mr Bates [for TDC] says that what local authorities are doing when they are going into competition with private sector providers is something quite different from that statutory regime. 8 I have had great difficulty in understanding this point. It does seem to me, and I think Mr Bates accepted this, that it is a possible response to the section 45 duty for a Waste Collection Authority not only to wait until it is requested on each occasion to arrange for the collection of waste, but to arrange in advance with a business that wants its commercial waste collected to do so under a contract for, say, the next 12 months and that there is nothing incompatible with section 45 for the local authority to specify in the contract the reasonable charge that it proposed to charge under that contract. That seems to me to be an example of premises within the local authority area requesting the local authority to collect its waste for the next 12 months and the local authority making a charge for doing so. The fact that it chooses to do that through the means of a contract does not, I think, and I did not understand Mr Bates to suggest it necessarily would, take the matter outside section 45. Once that is accepted, it is difficult to see why the sort of arrangements which are referred to in the decision could not be arrangements by which the local authority was discharging its statutory duty under section 45. … 11 … I see no error in Warren J’s conclusion that local authorities who provide collection services in their area may, depending on the facts, be operating under section 45 and since that is what he decided, I do not myself see that there is a reasonable prospect of success in challenging that in the way that Ground 1 seeks to do. 12 Ground 2 is as follows: Even if and insofar as the Upper Tribunal was correct that local authorities’ supplies of waste collection services constitute a discharge of the duty imposed by section 45, the Upper Tribunal erred in law in deciding that authorities providing such supplies were doing so under a “special legal regime”
“16. … it is the way in which the activities are carried out that determines the scope of the treatment of public bodies as non-taxable persons (see Ufficio Distrettuale delle Imposte Dirette di Fiorenzuola d'Arda v Comune di Carpaneto Piacentino (Joined cases 231/87 and 129/88)[1991] STC 205 at 235, [1989] ECR 3233 at 3275, para 15, and Comune di Carpaneto Piacentino v Ufficio Provinciale Imposta sul Valore Aggiunto di Piacenza (Case C-4/89 )[1990] ECR I-1869 at 1886, para 10). 17. It is thus clear from the settled case law of the court that activities pursued as public authorities within the meaning of [art 13] are those engaged in by bodies governed by public law under the special legal regime applicable to them and do not include activities pursued by them under the same legal conditions as those that apply to private economic operators (see in particular EC Commission v France (Case C-276/97 ) (2000) Transcript (Judgment) (Eng), 12 September, para 40, EC Commission v Ireland (Case C-358/97 ) (2000) Transcript (Judgment) (Eng), 12 September, para 38, EC Commission v United Kingdom (Case C-359/97 )[2000] STC 777 at 787–788, para 50, EC Commission v Netherlands (Case C-408/97 ) (2000) Transcript (Judgment) (Eng), 12 September, para 35, and EC Commission v Greece (Case C-260/98 ) (2000) Transcript (Judgment) (Eng), 12 September). … 19. In determining whether such an activity is engaged in by [the taxpayer] as a public authority, it must be noted, first, that this cannot depend on the subject matter or purpose of the activity (see Ufficio Distrettuale delle Imposte Dirette di Fiorenzuola d'Arda v Comune di Carpaneto Piacentino[1991] STC 205 at 235, [1989] ECR 3233 at 3275, para 13). … 21. The national court must, in accordance with the case law referred to in paras 16 and 17 above, analyse all the conditions laid down by national law for the pursuit of the activity at issue in the main proceedings, to determine whether that activity is being engaged in under a special legal regime applicable to bodies governed by public law or under the same legal conditions as those that apply to private economic operators.”
“13 I do however, for my part, think that Warren J was entirely right and that there is no real prospect of challenging the analysis he adopted which is that if local authorities are operating under section 45, then that is a special legal regime which is applicable to them in their capacity as public authorities exercising public duties and which is different from the legal regime which applies to private sector businesses such as the claimant even though, from the point of view of the consumer, the services provided may be indistinguishable. That is because, as Warren J sets out, the section 45 power is hedged around by a number of constraints. 14 [Nugee J sets out those constraints] 15 Mr Bates [for TDC] says that none of these things necessarily has any practical impact on the way in which local authorities are able to compete with his client and other operators and therefore they do not amount to a special legal regime, but they do seem to me to be exactly what the European jurisprudence is referring to, namely, that the legal conditions under which the local authorities are providing services are different, because of their function as public authorities, from the legal conditions under which their private sector counterparts are providing what may, as I say, from the point of view of the consumer, be indistinguishable services. In those circumstances, I do not regard Ground 2 as having a reasonable prospect of success either.”
“However, when they engage in such activities or transactions, they shall be regarded as taxable persons in respect of those activities or transactions where their treatment as non-taxable persons would lead to significant distortions of competition. …”
“23. Under art 132(1) of Directive 2006/112, member states are required to exempt a large number of cases, in favour of certain activities of general interest, including, in point (m) of that provision, sporting services, where they are supplied by non-profit-making bodies. The objective sought by the EU legislature is to encourage involvement in sport and physical activity, owing to the benefits which these provide for the population in terms of physical development and health. 24. By way of derogation from the rule laid down in art 132(1)(m), the first paragraph of art 133 of that directive confers on member states the option to make the grant of the exemption to non-profit-making bodies other than those governed by public law subject to four different conditions, including, in point (d) of that provision, the condition relating to competition. According to that condition, 'the exemptions must not be likely to cause distortion of competition to the disadvantage of commercial enterprises subject to VAT'. 25. All member states may apply that derogation. 26. In only the member states which, pursuant to Annex E to the Sixth Directive, on1 January 1989 applied VAT to sporting services, the second paragraph of art 133 of Directive 2006/112 offers the possibility of an additional derogation, whereby those states may make the grant of the exemption to non-profit-making bodies governed by public law subject only to the condition relating to competition, namely the condition set out in point (d) of the first paragraph of art 133 of that directive. It is true that the other conditions set out in that provision and, in any event, the conditions set out in points (a) and (b) are addressed more naturally to non-profit-making bodies governed by private law. 27. It follows from the foregoing that more favourable tax treatment is reserved for non-profit-making bodies governed by public law both in member states which, pursuant to Annex E to the Sixth Directive, on1 January 1989 applied VAT to sporting services and in member states which had not made use of that option. 28. In short, member states which, pursuant to Annex E to the Sixth Directive, on1 January 1989 applied VAT to sporting services may make the grant of the exemption subject to compliance with the four conditions laid down in the first paragraph of art 133 where the supplier of the sporting services at issue is a non-profit-making body other than one governed by public law, whereas in the case of non-profit-making bodies governed by public law, the grant of that exemption can be made subject only to the condition relating to competition. 29. Member states which had not made use of the option offered by Annex E to the Sixth Directive can make only the exemption granted to non-profit-making bodies other than those governed by public law subject to conditions, as non-profit-making bodies governed by public law are definitively exempted on the basis of art 132(1)(m) of that directive. If the member states do not impose such conditions, the services in question are definitively exempted for all non-profit-making bodies. 30. It is apparent from the request for a preliminary ruling that the United Kingdom is one of the member states which on1 January 1989 applied VAT to sporting services in application of Annex E to the Sixth Directive.”
“… the second paragraph of art 133 of Directive 2006/112 must be interpreted as precluding national legislation, such as that at issue in the main proceedings, where that legislation provides that compliance with the condition laid down in point (d) of the first paragraph of art 133 of that directive is a prerequisite for the grant of a VAT exemption to non-profit-making organisations governed by public law making supplies of services closely linked to sport or physical education, within the meaning of art 132(1)(m) of that directive, but fails also to apply that condition to non-profit-making organisations other than those governed by public law that make such supplies of services.”
“The Court of Justice of the European Union found, in the case of the London Borough of Ealing (Case C 633/15), that the UK had incorrectly excluded local authorities from the exemption for the provision of sporting facilities. Local authorities had been excluded from the exemption to ensure that there was no distortion of competition. However, the court decided that any restriction on those grounds had to be applied to both public bodies as well as private non-profit-making bodies providing sporting facilities. It followed that the local authorities were entitled to claim direct effect and therefore to treat those supplies as exempt from VAT provided that they did so on a consistent basis. HMRC has accepted the decision. This means that local authorities are entitled to recover any net over-declarations they have made as a result of having treated the supplies as taxable rather than exempt. The net over-declarations are calculated after deducting from the over-declared output tax any input tax wrongly claimed by prescribed accounting period (VAT return) on the assumption that the supplies in question were taxable and not exempt, unless that input tax is treated as insignificant …”
“33. All of the parties which took part in the hearing confirmed, moreover, that the United Kingdom legislation does not refer expressly to the condition relating to competition set out in point (d) of the first paragraph of art 133 of that directive. 34. Nonetheless, the referring tribunal, the parties to the main proceedings and the Commission proceed on the assumption that the exclusion of local authorities from the benefit of the exemption from VAT on the supply of sporting services is the consequence of the United Kingdom's use of the option granted to it by the second paragraph of art 133 to make the grant of the exemption to non-profit-making bodies governed by public law subject to fulfilment of the condition that it is not 'likely to cause distortion of competition to the disadvantage of commercial enterprises subject to VAT'. 35. At the hearing, the London Borough of Ealing stated that the United Kingdom authorities claim that they are entitled to rely on the condition relating to competition, a concept which is to be understood as the manifestation of their decision to exclude local authorities from the exemption because their activities necessarily cause distortions of competition. 36. The United Kingdom government's representative agreed with the London Borough of Ealing's comments on that point, taking the view that that position was justified by the danger that local authorities would subsidise sports activities and that a distortion of competition was the result of their 'likely conduct'. 37. The Commission took the same view and recognised that the condition relating to competition was nowhere expressly stated in the United Kingdom legislation, but that that was not necessary owing to the latitude left to member states by that directive. 38. On the assumption that the court accepts the argument that the United Kingdom legislation implicitly imposed the condition relating to competition, I shall base my reasoning in the remainder of this opinion on the assumption that, so far as the United Kingdom legislature and tax authority are concerned, the grant of the exemption from VAT on sporting services supplied by non-profit-making bodies governed by public law is 'likely to cause distortion of competition to the disadvantage of commercial enterprises subject to VAT' in all cases. Although the condition is implicitly present in the United Kingdom legislation, it is presumed, however, that it is never fulfilled.”