Under an EC ruling, all member states were required to exempt from VAT, with effect from 1 January 1990, supplies of sporting services by non-profit-making bodies. In fact, it took the UK until 1 April 1994 to enact the necessary legislation, and even then, the scope of the exemption was limited so that supplies to visitors, members’ guests and temporary members (under three months’ membership) were excluded and thus remained subject to VAT.
However, in a recent decision, the European Court of Justice (ECJ) has ruled that it is incorrect to restrict the VAT exemption for “certain services closely linked to sport” by reference to the recipients of the relevant services i.e. it is illegal to differentiate between members and non-members for the purpose of this exemption.
Consequently, non-profit-making golf clubs should now consider submitting claims for VAT overdeclared on non-members green fees for the period 1990-1996 (as the three year “capping” regime does not currently apply to this period) and also for a retrospective period of three years from now.
It has been estimated that a club generating £100,000 p.a. from non-members green fees might anticipate a total refund (including interest) of up to £200,000. HM Revenue & Customs may well seek to argue that the club would be “unjustly enriched” by receiving the refund, in which case the club would need to be able to demonstrate that the VAT-inclusive amount of the green fee was set on a “what the market will bear” basis, and it simply accepted a lower margin by accounting for the VAT out of the sum received.
Any club affected by the above should take prompt action, however, as the ability to submit a claim for the period 1990 – 1996 will expire on 31 March 2009.
If you would like more advice on the new rules please speak to your usual Hazlewoods contact or e-mail tax@hazlewoods.co.uk .