VAT decision confirms school holiday camps can be VAT exempt

HMRC have long taken the view that most holiday camps/activities offered by regulated commercial providers are subject to VAT at 20%. Several providers have been previously assessed for VAT on this basis and in light of the recent case below we strongly encourage providers in the sector to review their position if VAT is being applied. The decision may also have wider application to Not-For-Profit organisations such as schools and Leisure Trusts etc. 

Case summary

The VAT Tribunal has released its decision in RSR Sports Ltd (TC07450) concerning whether services provided by a regulated commercial operator of school holiday camps were VAT exempt as children’s welfare.

RSR argued the activities at camps were incidental to the supplies of (OFSTED) regulated childcare which it was making to children. It submitted that the range of activities it offered were commercially necessary in the provision of modern-day childcare as parents expect children to be stimulated and/or educated whilst being cared for in a safe environment. HMRC disagreed on the basis that the supplies fell outside the exemption. HMRC argued the primary aim of the camps was to offer sports and play activities and the childcare was a by-product of the activities.

In allowing the appeal, the Tribunal found that:

  • The services involved activities in the course of caring for children during the holidays.
  • The services included both activities and childcare. To make the services attractive to consumers, RSR emphasised the activities element. The Tribunal noted it would be hard for anyone to conclude that a typical parent did not have childcare in mind as at least some element of the service which was being offered; the children attending were being cared for during the school holidays by people who had the appropriate childcare qualifications and RSR was registered with OFSTED and the holiday camps were supervised by OFSTED to ensure compliance with the Childcare Act 2006.
  • The predominant nature of the supply was clearly VAT exempt children’s welfare.
What should you do next?

This is an important development in the sector, and if applicable to your business, you should ensure you speak to a VAT specialist in order to best benefit. If you would like to discuss this matter, then please contact your usual Baldwins contact or one of our specialist VAT team members who can advise you.