What does Brexit mean for the golf industry?

By mile October 1, 2016 09:01

Adrian Houstoun, a partner and VAT specialist at top 20 accountancy firm Kingston Smith LLP, analyses what Britain’s decision to leave the European Union will mean for golf clubs – especially in relation to VAT on green fees

It has still only been a few months since the UK stunned the world and sent financial markets into chaos by voting to leave the EU. It resulted in the UK being stripped of its AAA economic / financial rating by Standard and Poor’s to AA. This has led to concern about London’s status as an international financial hub – however this is unlikely to change in the short term, even though some investment decisions are ‘on hold’, London remains a global city and a convenient location for business between Europe and Asia, but what changes might take place following Brexit?

Leaving process and alternatives to the EU

Theresa May has said that Article 50 will be triggered before the end of March 2017, meaning that the UK will not cease to be a member of the EU until March 2019. Interestingly, in respect of taxation, HMRC has not, understandably issued any post Brexit briefs or information sheets. This is because we do not know which option the UK will select when it leaves the EU. The main options are: to be a member of the European Free Trade Association (EFTA) like Switzerland, a member of the European Economic Area (EEA) like Norway, Liechtenstein and Iceland, (both EFTA and EEA provide for the free movement of persons, goods, services and capital within the EU), become a Most Favoured Nation (MFN) like Australia, which does not have free movement of people and goods within the EU, or, finally, none of those. Neither EFTA, EEA nor MFN involves the Common Agricultural Policy (CAP). CAP is an EU wide scheme that implements a system of agricultural subsidies and other programmes for farmers, which may well impact on farmers in the UK.


Court of Justice decisions

In terms of taxation, the area that is likely to require the most changes is that of VAT and customs duties which are EU taxes. VAT law will also be impacted by the UK no longer falling within the jurisdiction of the Court of Justice of the European Union (CJEU). The CJEU is the chief judicial authority of the European Union and oversees the uniform application and interpretation of European law, and also resolves legal disputes between national governments and EU institutions, and often takes action against national governments that have not fully or correctly adopted EU laws; for example, it took action against the UK when it failed to exempt amateur sports including golf on taxation legislation. Once the UK leaves the EU it raises the question as to what the UK does about past CJEU tax decisions. You will no doubt be aware that in the Bridport and West Dorset Golf Club case the CJEU held that ‘green fees’ charged by non-profit making member’s golf clubs were exempt from VAT under article 132(1)(m) of the EU VAT law, and that the UK and indeed other member states have no power to differentiate between recipients of services which were essentially the same, such that visitor and member fees for playing golf in a non-profit making club had to have the same VAT exempt treatment. It remains to be seen whether post Brexit HMRC continue to complies with the decision of CJEU in Bridport or whether it seeks to return to its old policy of subjecting visitor fees to VAT at 20 per cent.


VAT was introduced in the UK on April 1, 1973 as a requirement of our decision to join the EU. During its first year, VAT was levied at just 10 per cent and raised approximately £1.5 billion for the Exchequer. Since January 2011 the rate has been 20 per cent and now raises approximately £100 billion for the Exchequer. At present under EU law the standard rate of VAT has to be a minimum of 15 per cent and with up to two lower rates permitted with a minimum of five per cent, except the UK negotiated an agreement to keep zero-rating on certain items when it joined the EU. After leaving the EU the UK will be free to set rates as it chooses. One area that is likely to be impacted is the VAT rate on sanitary products in respect of which the UK has been lobbying the EU to allow a lower rate, and where, post Brexit, we may well set the rate at zero. During the referendum campaign mention was also made about reducing the VAT rate on domestic energy bills, and this may also be introduced.

Secretary of Defense Chuck Hagel hosts on honor cordon for United Kingdom's Secretary of State for Defense Phillip Hammond at the Pentagon May 2, 2013. DoD photo by Sgt. Aaron Hostutler, U.S. Marine Corps.(Released)

Phillip Hammond

In 2014/2015 VAT contributed 22 per cent of the UK’s tax revenue so it is unlikely that there will be major changes to it, although both the UK government and new chancellor, Philip Hammond, will be free to abolish VAT and introduce something else such as a goods and services tax instead. In my view, however, I think that it would be extremely unlikely.

Purchases from overseas

Immediately after the referendum the value of the pound sunk, with the pound to dollar being at a 31 year low. Although it recovered some of the loss the weaker pound today means that in the short term there are likely to be advantages and disadvantages. The UK imports a significant proportion of food and groceries and golf clubs buy them for their restaurants. To the extent that they are not home grown, prices are likely to rise due to the weaker exchange rate. A large amount of wine is also imported into the UK from overseas and golf clubs sell a lot of wine in their restaurants and bars which will likewise cost more. I recently had the experience where I purchased a particular wine that had been the same price for four years and it was nearly 50 per cent higher than the pre Brexit price, much of which was due to the low value of the pound. On the other hand, the low value of the pound makes the UK an attractive destination for tourists, which may mean that golf clubs that attract visitors from overseas for golf holidays might be better off.

Customs duty impact

At present there are no customs duties on intra-EU trading. However once we leave the EU, assuming we do not join EFTA, EEA or become an MFN, the UK would no longer be part of EU’s Customs Union. Although golf clubs probably do not sell a significant amount of goods to the EU, if they do, EU’s customs duties would apply to imports from the UK, making them less attractive to buyers from the EU. Additionally the UK government may extend the current UK customs duties to imports from the EU, adding costs for UK golf clubs that buy goods from EU suppliers.


It will be quite a while before we know the exact degree to which we will be independent of the EU following our cessation as a full member, and even then, there will be a couple of years to plan for life after the EU. However in the meantime small steps can be taken, for example on foreign exchange management, to try and minimise any downside aspects that are already being experienced following the referendum.

Contact Adrian on 020 7566 3802



By mile October 1, 2016 09:01
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