Golf clubs to hear VAT decision in two to three months

Alistair Dunsmuir
By Alistair Dunsmuir July 22, 2015 12:00

Private members’ golf clubs that were expecting a large VAT payout from HMRC this April will find out in two to three months what they will get.

A reporter who attended the latest court hearing, this July, says clubs will probably receive between 54 and 95 percent of the entire payment they were expecting.

In January HMRC agreed to make substantial payments to hundreds of golf clubs for overpaid VAT by April. This followed the 2013 Court of Justice of the European Union (CJEU) ruling that VAT on green fees at private members’ golf clubs had been incorrectly applied for several years. This meant that scores of ‘not for profit’ clubs were able to claim the VAT back on green fees – believed to be worth several thousands of pounds to many of the venues involved.

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However, even though the payments were only up to 50 percent of what the recipient golf clubs thought they were owed, no claim was subsequently paid due to what has been described as a ‘lack of compliance’ regarding the claims.

A six-day court hearing has taken place at the Royal Courts of Justice in London, dealing with this issue and HMRC’s argument that unjust enrichment would occur should golf clubs receive a refund of VAT charged on non-member green fees that do not intend to pass the refund back to the green fee payer, which is why the organisation is not prepared to settle the claims fully.

“HMRC had to prove clubs set a green fee rate, add the VAT and pass the tax onto the consumer,” said David O’Sullivan, chairman of China Fleet Country Club in Cornwall, who attended the hearing and reviews it here. “The clubs argue that green fee prices are set according to the local competitive market and the club absorbs any tax burden.

“KPMG are fighting the case on behalf of over 460 clubs with many more queued behind. Three clubs were agreed by both sides to be lead cases and for the first five days had their accounts poured over by expert witnesses for each side appointed by the court.

“The sixth day dealt with other associated matters. These being the effect of VAT exemption on input tax reclamation, the treatment of corporate golf days and the Tour Operators Margin Scheme (TOMS).

“KPMG claim that input tax is recoverable as taxable supplies are being made in the form of on-course advertising, buggies, trolleys and club hire, and even protective clothing worn by course staff.

“HMRC stated there has to be a close link between exempt and taxable supply in order to be able to reclaim VAT and that they believe the link to be tenuous as opposed to closely linked.

“Whilst both sides agreed that corporate days are in the main taxable, this turns on who the ultimate beneficiary is. HMRC state it is the company who pay for the day with the intention of getting or retaining business. KPMG point out that a business cannot play golf, only people can. So is it the payer or the player who is the ultimate beneficiary?

“As for TOMS, this concerns golf played by non-members organised by a company specialising in golf breaks. HMRC claim these should be treated the same as corporate golf days. KPMG are adamant that HMRC are wrong, as the organiser does not play golf and only benefits from the profit margin achieved for their business, which is taxable.

“Finally, golf clubs may have wondered why no interim payments have been made as promised at the previous court hearing in January. This is because the claims had to be compliant, and no one seems to know ‘compliant with what’!

“For what it’s worth, it looks like most clubs will eventually receive a sum of between 54 and 95 percent of their claim plus interest. That is for the judge to decide, and this is likely to take two to three months.”


Alistair Dunsmuir
By Alistair Dunsmuir July 22, 2015 12:00
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