On Monday 2 November 2015, HMRC issued Brief 19/2015: VAT – supplies of sporting service by non-profit making bodies. In December 2013, in the matter of Bridport and West Dorset Golf Club (C-495/12), the CJEU concluded that the supply of green fee golf by private members golf clubs should be exempt from VAT. Following the judgment, HMRC announced (in June 2014) that it was considering whether to resist payment of claims made to recover VAT considered to have been overpaid, by reference to the unjust enrichment defence. The unjust enrichment defence permits HMRC to withhold repayment where it can show that the true burden of the VAT overpaid was not suffered by the taxpayer, but rather by the customers. It is a complex defence which requires an economic analysis of the extent to which the VAT is passed on, against which must be set any economic loss suffered by the supplier from having had to charge a higher price.
In January 2015, HMRC concluded that there were grounds for resisting payment following a review of four golf clubs in different areas of the country, including one championship club. It indicated that the championship club passed on a greater level of the VAT to customers than the other clubs. For the championship club, HMRC considered that unjust enrichment amounted to 67% of the VAT claimed, thereby permitting repayment of 33% of a claim; for the other clubs, the figure was 50%. The three clubs considered were the test litigants in the case on this issue, which was heard before the FTT in the summer. The clubs argued that any unjust enrichment was a very small percentage, in the order of a maximum of 5%, and that there was no difference between the different types of clubs.
HMRC had previously issued Brief 25/2014, indicating that further guidance would be issued concerning which clubs fell into the 33% repayment class and which into the 50% class. By the same Brief, HMRC expressed views on what amounted to a valid claim for overpaid VAT, covering such matters as the taxation of any green fee paid for by a corporate, tour operator involvement, and input tax restriction. Each of these matters is also being challenged by the clubs and will be dealt with by the FTT.
Judgment is expected from the tribunal over the next few weeks or months. However, HMRC has now finally decided how to determine the 33% v 50% split of clubs. The Brief determines that those clubs which charge a green fee of £100 or more ‘at any time of the year’ ‘now or during the claim period’ will be treated as falling within the 33% class of golf clubs. Whether this is a correct attribution is not something that the tribunal will consider. If the FTT concludes that there is no difference between the clubs, then of course the problem goes away. However, if the FTT concludes that there is a difference, we must hope that it will do so by reference to the characteristics that justify the difference, and this will then inform any further debate with HMRC on this issue.
By the current Brief, HMRC invites clubs to confirm that their claims are consistent with Brief 25/2014 in order to process an interim payment. There is a difficulty here for clubs. Brief 25/2014 treats any green fee which is paid for by a corporate entity as a taxable supply, because it is supplied to the corporate for the purposes of their business and not as a sporting service. The FTT is considering whether there is a valid distinction between a traditional corporate day (involving wider entertainment facilities) and the mere payment by a corporate. For most clubs, a corporate day package will be easily identifiable; however, a club may simply not even know who paid for a green fee of the more ordinary sort. It is therefore likely that clubs will be simply unable to ensure a claim is compliant with Brief 25/2014.
As a further small warning to any club which believes it can progress a compliant claim for interim payment, be sure to mark any adjustments to the original claim in respect of the matters that are before the tribunal as without prejudice to the outcome of the appeal, in order to be sure that no part of the claim is unnecessarily sacrificed.
On Monday 2 November 2015, HMRC issued Brief 19/2015: VAT – supplies of sporting service by non-profit making bodies. In December 2013, in the matter of Bridport and West Dorset Golf Club (C-495/12), the CJEU concluded that the supply of green fee golf by private members golf clubs should be exempt from VAT. Following the judgment, HMRC announced (in June 2014) that it was considering whether to resist payment of claims made to recover VAT considered to have been overpaid, by reference to the unjust enrichment defence. The unjust enrichment defence permits HMRC to withhold repayment where it can show that the true burden of the VAT overpaid was not suffered by the taxpayer, but rather by the customers. It is a complex defence which requires an economic analysis of the extent to which the VAT is passed on, against which must be set any economic loss suffered by the supplier from having had to charge a higher price.
In January 2015, HMRC concluded that there were grounds for resisting payment following a review of four golf clubs in different areas of the country, including one championship club. It indicated that the championship club passed on a greater level of the VAT to customers than the other clubs. For the championship club, HMRC considered that unjust enrichment amounted to 67% of the VAT claimed, thereby permitting repayment of 33% of a claim; for the other clubs, the figure was 50%. The three clubs considered were the test litigants in the case on this issue, which was heard before the FTT in the summer. The clubs argued that any unjust enrichment was a very small percentage, in the order of a maximum of 5%, and that there was no difference between the different types of clubs.
HMRC had previously issued Brief 25/2014, indicating that further guidance would be issued concerning which clubs fell into the 33% repayment class and which into the 50% class. By the same Brief, HMRC expressed views on what amounted to a valid claim for overpaid VAT, covering such matters as the taxation of any green fee paid for by a corporate, tour operator involvement, and input tax restriction. Each of these matters is also being challenged by the clubs and will be dealt with by the FTT.
Judgment is expected from the tribunal over the next few weeks or months. However, HMRC has now finally decided how to determine the 33% v 50% split of clubs. The Brief determines that those clubs which charge a green fee of £100 or more ‘at any time of the year’ ‘now or during the claim period’ will be treated as falling within the 33% class of golf clubs. Whether this is a correct attribution is not something that the tribunal will consider. If the FTT concludes that there is no difference between the clubs, then of course the problem goes away. However, if the FTT concludes that there is a difference, we must hope that it will do so by reference to the characteristics that justify the difference, and this will then inform any further debate with HMRC on this issue.
By the current Brief, HMRC invites clubs to confirm that their claims are consistent with Brief 25/2014 in order to process an interim payment. There is a difficulty here for clubs. Brief 25/2014 treats any green fee which is paid for by a corporate entity as a taxable supply, because it is supplied to the corporate for the purposes of their business and not as a sporting service. The FTT is considering whether there is a valid distinction between a traditional corporate day (involving wider entertainment facilities) and the mere payment by a corporate. For most clubs, a corporate day package will be easily identifiable; however, a club may simply not even know who paid for a green fee of the more ordinary sort. It is therefore likely that clubs will be simply unable to ensure a claim is compliant with Brief 25/2014.
As a further small warning to any club which believes it can progress a compliant claim for interim payment, be sure to mark any adjustments to the original claim in respect of the matters that are before the tribunal as without prejudice to the outcome of the appeal, in order to be sure that no part of the claim is unnecessarily sacrificed.
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