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Jun

VAT and Green Fees – Straight Down the Middle? PUBLISHED IN VAT

This will be a short blog, because the case decision to which it refers (Bridport Golf Club) has not yet been published, and we are in that brief period that always arises where news of an outcome is heard from the litigants but the detail of the decision remains essentially private. Nonetheless it is clear that the long awaited case concerning whether green fees charged to non-members by members’ golf clubs ought to be exempt in line with the supplies made to members themselves, has given rise to a decision by the tribunal. That decision is in favour of exemption for the services. The UK VAT legislation purports that the services should be taxable. The result is a direct strike at UK VAT legislation.

 

This can only come about by appealing over the head of the UK VAT rules to overarching EU VAT rules or principles. The key principle at play here is “fiscal neutrality”. The gist of this is that the same supplies, when made to different classes of customer, ought nonetheless to be taxed the same in order to preserve a “level putting green”. UK law says that only supplies to members of such clubs are exempt. The decision appears to say, at the least, that supplies to non-members now also should be exempt under that principle.
 
HMRC had sought to defend the position by saying that supplies to non-members must be, ipso facto, mere revenue raising exercises for the purposes of improving facilities open to members. That, they said, makes it a different kind of supply, not merely a supply to a different class of customer. The tribunal decision is likely to examine such a view hawkishly. As we already know, it found the concept wanting. But what will it say about any boundary lines it sets which a club might need to adhere to in order not to fall foul of that view? We shall see.
 
Meanwhile, what does this mean in micro and macro terms?
 
First, members’ clubs which make participation charges to non-members ought to start assembling a claim for overcharged VAT for the last four years as soon as possible. They need to consider the impact on VAT recovery on costs, which could actually be profound and, in certain cases perhaps, positively injurious. For those for which the input tax impact might be worse than the output tax savings, the unhappy consequences should be discussed with an adviser.
 
On a macro level, all providers of exempt sporting supplies need to consider whether there are services which they currently treat as taxable but which follow on from this decision and could perhaps be regarded as exempt. This is not merely about “green fees”. It affects sports outside golf.
 
On a universal level, here is a case which fuels the whole “fiscal neutrality” debate. How far can the principle be stretched? What are the boundaries, so to speak, of the “level playing field”?
 
A footnote: Sports clubs should not assume from this that the criteria for exempting sports services are generally liberalised by such a decision. This is about a specific aspect. The tight rules concerning profit distribution and “commercial influence” remain intact. Indeed, here is one cloud to the otherwise good news on this issue: There is no suggestion (subject to the detailed decision text) that the principle of fiscal neutrality extends to treating different classes of supplier the same for VAT. The condition of being a non-profit body remains legitimate, and that means that proprietorial providers still have to account for VAT and the news just released makes their position even more unequal. A point that will not be lost on HMRC as it considers its next steps.
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