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HMRC : Unjust enrichment : Non-profit making sports clubs

By HMRC

1. Purpose of this brief

This brief provides information on how HM Revenue and Customs will treat claims for VAT refunds from sports clubs following the First Tier Tribunal (FTT) decision in Berkshire and Others handed down on 07 December 2015. This brief cancels Revenue and Customs Brief 25/14 and 19/15.

2. Readership

Members’ golf clubs and other non-profit making sports clubs and their advisers.

3. Background

The Court of Justice of the European Union found, in the case of Bridport and West Dorset golf club, that the UK had incorrectly applied VAT to certain supplies made to visitors of non-profit making clubs. HMRC had subsequently denied repayment of VAT claims for overpaid VAT on the basis they would be unjustly enriched.

A number of clubs challenged HMRC’s refusal to pay out claims and appealed to the FTT. While the FTT found that the clubs would be unjustly enriched if HMRC paid their claims in full, it was not to the extent HMRC had considered. The FTT concluded the clubs would be unjustly enriched by 10% and were therefore entitled to a 90% refund of the VAT incorrectly paid. HMRC has decided not to appeal the decision and will be making VAT refunds, subject to claims meeting the terms of VAT Information Sheet 01/15.

4. Other issues considered by the FTT

The FTT also considered the VAT treatment of corporate days and supplies to tour operators. It found that both supplies were taxable at the standard rate of VAT. It also found, on the facts of the cases, that VAT on golf course maintenance costs was an overhead of the clubs and was to be apportioned in accordance with a partial exemption method as appropriate. This may not always be the case, as the onus is on the club to demonstrate a link between its taxable activities and course costs, in order for such costs to be treated as residual.

The FTT determined that corporate days (supplies made to businesses who use them for their own purposes and so are the true beneficiaries), include green fees and any ancillary supplies (such as catering) supplied to the business concerned, irrespective of how they are constituted. Some clubs may refer to these taxable supplies as golf society days or by some other description, which is different from the VAT exempt society days described in VAT Information Sheet 01/15.

5. Making a claim

All claimants must confirm that their claims have been adjusted in accordance with VAT Information Sheet 01/15.

All claims must be sent to:

VAT Bridport Claims SO483
PO Box 200
BOOTLE
L69 9AH

6. New claims

All new claims will be subject to the 4 year time limit in section 80(4) of the VAT Act 1994.

7. Return adjustments

Members’ clubs with over declarations of output tax within certain monetary limits may wish to correct any errors on their VAT returns rather than submit a formal claim under section 80 VATA 94 to HMRC. However, in doing so they would not receive any interest. Further information on the monetary limits and which returns may be adjusted is available in VAT Notice 700/45: How to correct VAT errors and make adjustments and claims.

8. Penalties

In circumstances where members’ clubs have not taken due care in submitting valid claims, they may be charged a penalty in relation to prescribed accounting periods starting on or after 1 April 2008, where the return due date is 1 April 2009 or later. For example, a club may incur a penalty if, as a result of a failure to take reasonable care, it shows too little tax due or claims a repayment that is too large on its VAT return.

9. Implications on other taxes

Where amounts of overpaid output tax are repaid and not reimbursed to customers who bore the burden of the tax, there may be direct tax implications. For example, any surplus of trading income from non-members that remains after the deduction of relevant expenses is taxable, for Corporation Tax purposes and a liability may arise.

Published May 2016