Cost of golf to be challenged in court

Alistair Dunsmuir
By Alistair Dunsmuir April 27, 2012 12:52

A golf venue is taking the UK government to court over the definition of membership of a golf club. If it wins, the tax that golf clubs pay and funds they could reclaim will change, and the price of playing golf could even fall dramatically in the country.

The case is so potentially far-reaching that a group of separate golf clubs are trying to raise £72,000 to pay for a barrister to make sure they are represented at the same tribunal.

On May 28, Chipping Sodbury Golf Club will argue at a VAT final hearing that club membership is made up of a ‘package of services’, of which one is the provision of a facility for the ‘playing of sport’. Under EU law, this would mean that that aspect of membership is exempt from VAT. However, at the same hearing, which is set to last five days, Her Majesty’s Revenue and Customs (HMRC) is set to argue that club membership consists only of one ‘single service supply’, which would mean that the relevant European legislation does not apply to it.

Chipping Sodbury, which is effectively representing more than 1,700 sports’ clubs that are waiting to have similar tribunal cases heard, as well as four golf clubs named in its case, has appointed a VAT consultant, Fred Cowgill, who will argue that a significant portion of a golf club membership fee, believed to be between 30 and 52 per cent, relates to the playing of sport, and it is that amount that should be VAT exempt.

This would mean that, if Chipping Sodbury is successful, the price a golfer pays to be a member of a proprietary golf club could drop by more than 10 per cent without affecting the income generated, and that proprietary clubs could recover some of the VAT paid on all their membership subscriptions since 1990, which is when private members’ clubs were first allowed to offer VAT-exempt subscriptions.

It would also be hugely significant for private members’ golf clubs, of which Chipping Sodbury is one. If the Gloucestershire club wins the case, they could all recover some of the VAT paid on membership subscriptions between 1973 and 1990, potentially worth thousands of pounds each.

The club has been supported by England Golf, the body that runs amateur golf in England, which has called for a lower flat VAT rate for playing golf, and is believed to have contributed about £100,000 to the professional and legal costs of the action over the last two years. Several golf clubs also made donations.

Some of that money went to a firm called VATability, which is no longer trading, which has led to some clubs questioning if their money was wasted. However, Fred Cowgill, who was a director of VATability, has stated that he has retained the individual files for VAT reclaims to be re-submitted once the tribunal chairman has made a decision.

Bob Williams (pictured), general manager of Chipping Sodbury Golf Club, said: “I maintain the view that HMRC needs to sit round a table and discuss taxation with leading industry figures. But all efforts have so far been rejected.”

He added that HRMC did not submit its witness statement for the tribunal hearing by the deadline given to it, which could result in the May 28 date being pushed back.

In a separate development, former British women’s Open champion and founder of the Women’s Professional Golf Association, Vivien Saunders OBE, owner of Abbotsley Golf Club in Cambridgeshire, has set up a fighting fund to pay tax barrister Michael Sherry to ensure that proprietary golf clubs are represented at the hearing.

“We have had cheques and payments from about 15 clubs so far, with pledges from another 30 or so,” she said.

“Donations are ranging from £250 to £2,000. We need to get a total of £72,000 for Michael Sherry’s fees. The United Kingdom Golf Course Owners Association [UKGCOA] are supporting our aims of getting Michael Sherry acting for us all.

“Proprietary clubs can send funds to the Association of Golf Course Owners at Abbotsley Golf Hotel, St. Neots, Cambridgeshire PE19 6XN, with cheques made payable to the Association of Golf Course Owners. The fund is solely there for fees for Michael Sherry – nothing else. Our team of volunteers have been working on this project now for months and we want to get the best representation we can for the case.

“Many member-owned golf clubs will be benefiting from the case if there is success in recovering VAT before 1990. Michael Sherry, if we can fund him, will represent everyone. It would be good to get contributions to the fighting fund from them too.”

A spokesman for UKGCOA added: “We feel it is too risky for the tribunal to be led by VAT technicians and not a barrister. Knowing a positive decision will go a long way to resolve the tax inequality issues for golfers playing at proprietary clubs, UKGCOA invites its members to make a pledge of financial support towards the cost of the barrister.”

The manager of one proprietary golf club said he does not believe the case will result in cheaper golf, but it could secure the future of many golf clubs. “The main issue is that proprietary clubs have to run at a loss, or at near to zero profit, to compete with member-owned clubs because of the taxation inequalities,” he said.

“If, as we hope, equality is eventually achieved at a lower rate of VAT, then proprietary clubs can start to derive some trading profit for reinvestment into the future of golf at their facilities.

“I do not believe that, if Chipping Sodbury win this case, the cost of golf to the amateur golfer will notably reduce as the UK is already one of the cheapest countries in Europe in which to play golf, but it will mean that the golfer who plays at a proprietary golf club will pay the same VAT as the golfer who plays at a nearby member-owned golf club, that is, a level playing field will result.”

Earlier this year HMRC ruled that private members’ golf clubs do not have to charge VAT on green fees if the buyer is an associate member of the club.

According to Saunders, the Chipping Sodbury case is particularly important because that HMRC ruling on green fees is so far-reaching in itself, as it will lead to an even bigger distortion in the tax private members’ clubs pay compared to proprietary ones.

“In the past, HMRC have allowed clubs to give VAT-exempt subscriptions to members who had no vote, no interest in the club’s assets, no right to stand for office or to go to the AGM, such as five-day members,” she said. “We have always maintained that they have the same rights as members at proprietary clubs – none at all. The recent HMRC decision reinforces that loophole.

“The decision makes the potential for members’ clubs quite clear. Make every visitor an associate member. Now their fees are exempt from VAT and not subject to corporation tax.

“The Chipping Sodbury case is about member-owned clubs attempting to recover VAT, but it is also about proprietary clubs trying to get equal treatment and eliminate the current distortion. Hopefully it will force the government to adopt a reduced rate of VAT for sport of five per cent.”

Last year Bridport & West Dorset Golf Club won a case against HMRC to claim back the VAT it had spent on green fees for non-members of the golf club, but HMRC appealed the decision, which is due to be heard this July. If that appeal is unsuccessful then private members’ clubs should be able to claim back four years of VAT paid on all green fees.


Alistair Dunsmuir
By Alistair Dunsmuir April 27, 2012 12:52
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  1. Geoff Duffell May 16, 00:29

    Sandra, For most clubs you are right, but it is marginal. Certainly not to the advantage that the proprietary clubs make it out to be. If the ruling on attribution ( I said principle of aportionment I should have said principle of attribution) is invoked following the ruling on green fees case then most private clubs will certainly miss out, they will never be able to claim back vat on purchase of equipment.

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  2. Sandra Callander May 15, 16:37

    Good point Geoff – but if you factor in the free VAT on private club members and the VAT that profit seeking clubs can claim back on equipment, does it balance out?

    I genuinely do not think so

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  3. Geoff Duffell May 15, 16:27

    The arguement that proprietary golf clubs lose out to private clubs is flawed because it overlooks a fundamental point regarding the ability to claim back input vat incurred on operating costs. A proprietary club as a registered business can offset all input vat incurred. A private club is only allowed to reclaim a proportion of vat incurred based upon its vatable to non-vatable income. This typically amounts to 30%. One can see on most clubs annual accounts the amount written off as vat non-recoverable. Because this is a cost to be borne, club subscriptions have to be increased to cover the amount.
    To argue therefore that proprietary clubs are disadvantaged by a full 20% vat rate is incorrect, their costs do not have to cover an irrecoverable vat charge. This position will of course be made even worse for private clubs if the ruling that no vat should be added to green fees as the proportion of incurred vat allowed to be recovered will reduce. Further, if HMRC lose their appeal, it is likely they will invoke the principle of apportionment to golf club costs. This would be that if there is no vatable income appropriate to the course (members and visitors contributions vat free) then no input costs incurred for course maintenance could be recovered. Only clubhouse costs appropriate to bar and restaurant services will be allowed.

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  4. (@fynnvalley) (@fynnvalley) April 30, 09:26

    » Cost of golf to be challenged in court

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  5. (@golfclubadvisor) (@golfclubadvisor) April 28, 00:50

    Golf Management News Cost of golf to be challenged in court – A golf venue is taking the UK government to court over…

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  6. Mark Kemp (@markuskempus) April 27, 17:40

    » Cost of golf to be challenged in court

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  7. (@MileEndGolfClub) (@MileEndGolfClub) April 27, 15:45

    » Cost of golf to be challenged in court

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