Revenue & Customs Brief 25/14

VAT: Supplies of sporting services by non-profit making bodies – implications of the judgment by the European Court in Bridport and West Dorset Golf Club Ltd (C-495/12)

Purpose of this brief

This brief provides an update on HM Revenue & Customs (HMRC) policy following the decision by the Court of Justice of the European Union in Bridport & West Dorset Golf Club in December 2013. It explains HMRC's:

  • interpretation of the judgment and the subsequent change to the policy
  • approach to repayment claims by non-profit making golf clubs and other members' sports clubs in respect of VAT incorrectly charged to non-members

It also updates the position set out in Revenue & Customs Brief 30/11 issued 27 July 2011.

Readership

Members' golf clubs and other non-profit making sports clubs and their advisers.

Background

Bridport and West Dorset Golf Club is a non-profit making members' golf club. Under EU Law supplies by non-profit making bodies of services closely linked and essential to sport to persons taking part in sport are exempt from VAT. In UK law, where the body operates a membership scheme, any supplies to individuals who are not members are excluded from the exemption on the basis that the fees received represent 'additional income' for the purposes of EU Law.

The Bridport appeal concerned green fees paid by visitors (non-members) -Bridport had made a claim for repayment of VAT on green fees arguing that the exclusion of supplies made to non-members was not permissible under EU law.

The European Court of Justice (CJEU) found that where a supply is made by a non-profit making body it is immaterial whether it is provided to a member of the body or a visitor. It took the view that a Member State has no power to exclude certain groups of recipients of services from the benefit of the exemption -'additional income' could not be construed in such a way that it would lead to such a restriction in the scope of the exemption.

The CJEU also rejected the argument that the exclusion of supplies to non-members was permissible on the basis that it had the effect of reducing distortion of competition between members clubs and commercial organisations.

Implications of the Judgment

As a result of the CJEU judgment, HMRC accepts that supplies of sporting services to both members and non-members of non-profit making sports clubs qualify to be treated as exempt from VAT. This is provided that the services are closely linked and essential to sport and are made to persons taking part in sport. HMRC will legislate by 1 January 2015 to reflect this.

HMRC will ensure any future changes comply with the decision of the CJEU.

Claims for Overpaid VAT

HMRC intends to deal in two phases with claims for the repayment of overpaid tax for previous periods:

I. Phase 1. Members' clubs that decide to reimburse non-members who were incorrectly charged VAT on sporting services supplied to them (including members' golf clubs that incorrectly charged VAT on green fees) and will adopt the reimbursement arrangements explained in Sections 9 & 10 of Notice No. 700/45 'How to correct VAT errors and make adjustments or claims'.

Where a members' golf club or other non-profit making sports club considers it has overpaid VAT on sports related services it may make a claim to HMRC under section 80 of the VAT Act 1994 for repayment of VAT incorrectly accounted for. Such claims are subject to the conditions set out in Notice 700/45. This means that clubs will need to demonstrate that they have made arrangements to reimburse the VAT to non-members who actually paid it, and make a legally binding commitment to do so in a timely manner.

Claimants who intend to reimburse non-members need to ensure that their claim is adjusted to reflect any over claim of input tax by application of their partial exemption and/or capital goods scheme calculations as appropriate before advising HMRC they wish to proceed under Phase 1.

HMRC will meet eligible claims under the terms of sections 9 & 10 of Notice 700/45 providing the conditions are met. HMRC reserves the right to examine the quantum of the claim, including the requirement to apply revised partial exemption and capital goods scheme calculations as appropriate. All Phase 1 claims should be sent to the following address:

VAT Bridport Claims S0483
PO Box 200
BOOTLE
L69 9AH

II. Phase 2. Clubs that do not adopt reimbursement arrangements

HMRC are examining the scope for restricting repayments to clubs not making arrangements to reimburse the paying non-members to avoid the unjust enrichment of members' clubs. Further advice will be issued on these claims after a conclusion has been reached on this point.

Existing Claims

Where a submitted claim has already been rejected by HMRC and the claimant has not appealed, that claim cannot now be resubmitted. Any claims submitted now will be a new claim subject to the four-year time limit.

Rejected claims that were appealed to the First Tier Tribunal, however, are still open.

If a claimant wishes to claim any additional amounts in respect of non-members that were either overlooked or the result of calculation errors for accounting periods in the original claim, that claim can be amended. However, this only applies where the amendment is, for example, the correction of an arithmetical error or the inclusion of elements, non-members, etc. that were within the contemplation of the original claim. If the claimant wishes to claim for something not within the contemplation of the previous claims or for new accounting periods, a new claim will need to be submitted just for these items.

New Claims

All new claims will be subject to the four-year time limit in section 80(4) of the VAT Act 1994.

Claims made should be adjusted for any amounts due to set-off under section 81(3) of the VAT Act 1994 (outstanding debts, assessments, etc.) and section 130 of the Finance Act 2008 (outstanding debts under any other head of taxation). In particular, claimants will need to adjust for any resultant over claim of input tax by application of the appropriate partial exemption calculation. In some cases, it may be necessary to revisit Capital Goods Scheme adjustments.

All new claims should be sent to the same address as for Phase 1 claims above.

All Claims (whether New or Existing claims)

Finally, it should be noted that where amounts of overpaid output tax are repaid and not re-imbursed to affected customers, there may be direct tax implications. For example, trading income from non-members is taxable and therefore any surplus of non-member income that remains after the deduction of relevant expenses is liable to Corporation Tax.

Who can I contact for further information?

For further information please contact the VAT Helpline on telephone: 0300 200 3700.

The Helpline is available from 8.00am to 6.00pm, Monday to Friday.

If you have hearing difficulties, please ring the Textphone service on telephone: 0300 200 3719.

Issued 25 June 2014

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