Ruling: Green fees must be exempt from VAT19th December, 2013 by Alistair Dunsmuir
The Court of Justice of the European Union (CJEU) has ruled that VAT on green fees at British private members’ golf clubs has been incorrectly applied for several years.
It is thought that this landmark ruling will have major ramifications for the industry – in particular green fees that visitors to private members’ golf clubs pay must now be exempt from VAT.
The decision should also allow private members’ golf clubs to recover thousands of pounds-worth of VAT paid on green fees over several years. It could also lead to a reduction in the cost of playing golf at private members’ clubs for non-members and there are fears that proprietary golf clubs could close down as a result of the decision.
In 2011 the First Tier Tax Tribunal in the UK ruled that green fees at Bridport & West Dorset Golf Club, which had previously been subject to VAT, should be exempt, as they did not represent ‘additional income’ for the club.
This was set to mean that every private members’ golf club could claim for a VAT refund going back at least four years, generating, in total, millions of pounds for some British golf clubs. Bridport & West Dorset Golf Club alone has been reported as hoping to claw back about £140,000.
However, following appeals, what is believed to be the final decision has not been made until now by the European Court of Justice.
It found that all supplies of the facility to play golf provided by non-profit making clubs must be exempt from VAT and that there can be no exclusion from exemption by reference to green fees being income not arising directly from memberships.
It was also held that it is not possible to apply a general exclusion which narrows the scope of the exemption as provided on the face of the legislation.
“The issue in dispute was whether or not green fees charged to visitors should be treated as exempt from VAT,” said Paul Stewart, director of KPMG.
“HMRC argued that green fees should be taxed whereas on behalf of the golf club we argued that they should be treated in the same way as annual subscriptions.
“I am delighted to say that the lead case taken by KPMG was successful – European VAT legislation had not been correctly implemented in the UK.
“In light of the positive result, we expect that HMRC will shortly start to process claims. Due to the significant volume of claims made, we have contacted HMRC with a view to agreeing a centralised approach for claims processing, to ensure that the matter is dealt with efficiently and that all taxpayers are treated similarly.”
Shirland Golf Club in Derbyshire hopes to receive a five-figure payout as a result of the ruling.
“We are having to look closely at what the ruling’s impact will be but we could be entitled to reclaim VAT paid on non-members’ green fees for the past four years, which would be to a decent amount of money,” said club chairman Mick Murtagh.
“Our membership, like most clubs, has fallen sharply as a result of the recession but if we can reclaim the wrongly-charged VAT we will be able to balance our books and be less reliant on the great generosity shown to us by landowner Martin Speed, who has given us a rent-holiday until March 2015.
“Getting this money back from HMRC will give us breathing space to attract new members as the national economy recovers and allow us to finish the massive improvements we’ve made to most of the course.”
Adrian Houstoun, a tax expert at Kingston Smith, added: “This matter went to the CJEU because HMRC in the UK adopted a policy of permitting not-for-profit golf clubs to only exempt supplies of playing fees to members whilst the dues in respect of visiting golfers were regarded by HMRC as taxable.
“The CJEU have issued their judgement which does not support HMRC and declares that all the playing fees of a not-for-profit golf club are exempt.
“If such golf clubs have accounted for VAT on visitors fees but have not yet made a claim on HMRC they should do so without delay.”
The ruling does not apply to proprietary golf clubs, many of which have complained about a tax distortion and unlevel playing fields between themselves and private members’ clubs for several years.
Fynn Valley Golf Club in Suffolk has said it has already lobbied its MP about the ruling, which it said is “unfair”.
“The result of this ruling means that members, who were already VAT exempt, and now visitors to private members’ golf clubs, will not have to pay an extra 20 percent tax on the cost of playing golf,” said the manager of another proprietary golf club who did not wish to be named, “but members and visitors to proprietary clubs will still have to pay that levy.
“Great news for private members’ clubs who can claim back thousands from the taxpayer. Dreadful news for proprietary clubs that already pay more tax anyway – many will now go under as they will not be able to compete.”