Golf clubs lose VAT hearing4th October, 2012 by Alistair Dunsmuir
A challenge against the way golf clubs pay VAT on their memberships, which could have led to huge payouts to venues, has been unsuccessful.
Earlier this year Chipping Sodbury Golf Club argued against Her Majesty’s Revenue and Customs (HMRC) at a tax tribunal first tier that it was due a VAT refund on membership subscriptions prior to 1990, when, as a private members’ club, it became VAT-exempt. Any ruling in its favour would have probably also meant that proprietary clubs could have recovered some of the VAT paid on their membership subscriptions since 1990.
Chipping Sodbury’s argument was that club membership is made up of a ‘package of services’, of which somewhere between 30 and 52 per cent is the provision of a facility for the ‘playing of sport’ and therefore should be exempt from VAT.
In linked tax tribunals, other golf clubs – Mendip Spring, Trent Lock and The Dyke – also argued for VAT refunds on the basis that subscription fees included membership of England Golf and entry to club competitions, services for which no VAT should be payable, and that as private members’ golf are exempt from the charge, proprietary ones should be as well.
However, the tribunal judges have ruled that membership subscriptions are a single supply of services and therefore no portion of them can be exempt from VAT.
They also decided that they have no jurisdiction over whether proprietary clubs should be exempt from VAT because private members’ clubs are, as this would mean commenting on the lawfulness of a 1999 sports’ order.
The judges did state that golf clubs could be due a refund regarding VAT on subscriptions to England Golf, and indicated that the appellants may apply to the tribunal to resolve this issue.
Bob Williams, general manager of Chipping Sodbury Golf Club, said he was disappointed with the outcome.
“The overall decision is extremely disappointing for both ‘not-for profit’ and proprietary golf clubs, and certainly not what we were expecting,” he said.
“No further actions or decisions will be made until a meeting with the barrister Mr Michael Sherry has been convened. At this stage we will discuss, and hopefully fully understand, what options are available to us going forward.”
However, not all proprietary clubs are upset with the ruling. A spokesman for the Association of Golf Course Owners (AGCO), which only represents proprietary clubs and helped provide funding for Michael Sherry’s fees, said that as the judges accepted that there was a distortion between private members’ clubs and proprietary clubs when it comes to taxation, this was in itself a victory.
“The main aim for proprietary clubs was to get the ruling that there is distortion and we got that. As far as we are concerned, that was a success and a win – we got the order we wanted and this is very positive for proprietary clubs,” said the spokesman.
“We are bitterly disappointed that the judges did not comment on the 1999 VAT Sports’ Order though. Andrew Sutcliffe from Tickenham Golf Club, vice chairman of AGCO, put in a witness statement about the effect of the 1999 order and was there at court ready to give evidence on this. For some reason it was withheld and we do not know why.”
Meanwhile, a spokesman for the United Kingdom Golf Course Owners Association (UKGCOA), disagreed that the ruling was only beneficial for the proprietary sector.
“AGCO and UKGCOA clearly informed proprietors before the case that if the case were successful on the apportionment claim, both proprietary clubs and member-owned clubs would be better off. To now claim that member-owned clubs lost the case and proprietors won – as the tribunal judge rejected the apportionment claim but agreed that distortion exists – is not correct,” he said.
“Whilst it is a good step forward in the fight for a level playing-field for taxation to have the tribunal judge agree that distortion exists in the golf market, this had already been accepted by HMRC 10 months earlier when they used the distortion issue as a reason why they were appealing against the Bridport & West Dorset case. Of course, to have distortion once again repeated in a tribunal judgement is good news and we hope will help in the overall campaign.”