VAT rebate claims bunkered!

Posted: 19th September 2012

In refusing to grant substantial VAT rebates to four golf clubs the First-Tier Tribunal has ruled that the various benefits provided by the clubs to their members in return for annual subscriptions are a single supply of the right to play golf.

Golf at seasideIn a vital ruling for golf clubs nationwide, the tribunal has also rejected arguments on behalf of profit-making golf clubs that they should be relieved from the obligation to pay VAT on distortion of competition grounds.

Two clubs which are owned and operated solely for the benefit of members (the members’ clubs) had argued that they had overpaid VAT in years preceding 1 January 1990, on the mistaken basis that members received a single supply of services in return for their subscriptions.

It was submitted that, as well as obtaining the right to play golf on the club’s courses, members had also received other benefits - including the right to take part in competitions, newsletters and various other publications and the opportunity to hire club rooms - which should have been zero-rated for VAT purposes.

However, in ruling that the various benefits provided to members in return for their subscriptions were a single supply of services, the tribunal observed that members paid a single price for those services and that the right to play golf on the clubs’ courses was the principal benefit that they received.

Since January 1 1990, the subscription income of non-profit-making golf clubs managed by and for the benefit of members has been treated as zero rated by Her Majesty’s Revenue and Customs (HMRC) on the basis of the sporting exemption from VAT.

This treatment engendered arguments from two proprietary golf clubs, which are owned and operated for the benefit of their proprietors, that the requirement imposed on profit-making clubs to account for VAT on membership subscriptions had led to a distortion of competition.

However, whilst accepting that such distortion was the inevitable result of the different treatment of members’ and propriety clubs by HMRC, the tribunal emphasised that the sporting exemption from VAT is restricted to non-profit-making organisations.