In a decision released just before Christmas, the European Court of Justice upheld the Bridport & West Dorset Golf Club’s argument that the UK’s VAT treatment of the green fees the club charged its visitors was wrong and that the fees paid by visitors (standard-rated) should be treated no differently than those paid by members (exempt).
The club, which was advised by KPMG, had claimed that the green fees should be exempt because the right to play golf was the same whether it was supplied to a member in return for membership fees or to a visitor in return for green fees.
HMRC argued that, under the 1994 VAT Act (Sch 9, Group 10, Item 3), supplies by non-profit-making bodies of “services closely linked and essential to sport” to individuals taking part in sport are exempt from VAT. However, where the bodies operate a membership scheme, any supplies to non-members are excluded from the exemption and subject to VAT.
The First Tier Tribunal disagreed and said that UK law had incorrectly implemented the terms of the Principal VAT Directive. HMRC appealed.
The Upper Tribunal referred the case to the ECJ because, it said, it needed guidance on the meaning of the phrase “additional income” in Art 134(6) of the directive and on the extent of a member state’s discretion under Art 133(d).
The European Court said that all supplies by non-profit-making clubs of the right to play golf must be exempt and that it was not possible to apply a general exclusion which narrows the scope of the exemption.
The case has now been referred back to the Upper Tribunal.
HMRC has not yet published an official response to the decision but, as BDO points out, not-for-profit golf clubs should be able to claim back VAT paid on green fees over the last four years. Some which submitted claims to HMRC before 2009 might even be able to get refunds for as far back as 1990.
BDO tax partner Billy Cairns described the decision as “potentially very good news”, particularly since non-club golfers might see the price of their round of golf fall, “depending on how generous clubs are feeling”.
“Golf clubs have always disagreed with HMRC over its distinction between members and non-members and have felt this contravened European law,” he said. “The court's judgment clearly upholds this view and, unless HMRC comes up with a totally different argument, it looks like Bridport’s appeal will be allowed and HMRC will have no choice but to repay VAT claims from clubs stretching back many years.”