VAT Focus - January 2014

Participation in sport provided by not-for-profit clubs

The European Court of Justice (CJEU) has released its judgment in the Bridport & West Dorset Golf Club case. This clarifies the scope of the exemption from VAT in respect of services provided by non-profit making bodies to individuals participating in sport. Historically the club had treated membership subscriptions as exempt supplies and 'green fees' charged to visiting players as subject to standard-rated VAT.

Back in 2009 the club put in a claim for incorrectly charged VAT, on the basis that such supplies should be covered by the EU exemption rules; this was refused by HMRC and following appeal hearings in the UK, the case was referred to the CJEU for a ruling.

The decision of the CJEU means that the granting of the right to participate in sport by a non-profit making body should be an exempt supply for VAT purposes regardless of whether the supplies are to members or non-members. This could potentially apply to a range of sporting clubs, not just golf clubs, established on a not-for-profit basis, that have previously charged VAT to non-members for the participation in sport.

What next? The ruling means that all supplies by non-profit making bodies (for example membership clubs) linked to the participation in sport should be exempt and they should now review their current prices to ensure that VAT is not being charged incorrectly. Clubs should also consider submitting a claim to HMRC for over-declared VAT, if they have not already done so, for the past four years. This will, however, have an impact on input VAT previously recovered as this will now be attributable to an exempt supply without the ability to recover related input VAT. Let's look at the bricks and mortar

The case of Leyton Sixth Form College v HMRC [2013] UKFTT 660 (TC), provides a useful summary of the approach the Tax Tribunal will adopt when considering whether construction services provided should be zero rated.

This case concerned the differences in interpretation of what was constructed and the liability of the supply of construction services to the college. The college claimed that what was constructed was an annexe and therefore the construction services were zero rated; HMRC argued that it was an enlargement or extension to an existing building rendering the construction services liable to the full standard rate. If the services were taxable at the standard rate approximately £500,000 of VAT would be due on...