HMRC has published details of their revised policy on the extent of the VAT exemption for sporting services by non-profit making bodies following the CJEU decision in Bridport & West Dorset Golf Club. This case related to the taxation of green fees to non-members.
As a result of the judgement, HMRC accepts that supplies of sporting services to both members and non-members of non-profit making sports clubs qualify to be treated as exempt from VAT and will legislate by 1 January 2015 to reflect this view.
Claims for overpaid VAT
Members clubs that are affected can submit retrospective claims for overpaid VAT which will be subject to the four-year cap. It should be noted that claims must be adjusted to reflect any over-claim of input tax as a result of their partial exemption calculation. In addition, where clubs have undertaken capital projects, the additional exempt income may result in significant repayments under the Capital Goods Scheme.
Proposed restriction of retrospective claims
HMRC are considering the possibility of restricting repayments under the ‘unjust enrichment provisions’ to clubs who do not intend to reimburse the VAT recovered to non-members and will be advising further when they have reached a conclusion on this issue.
HMRC can only successfully argue for unjust enrichment if they can show that someone other than the club effectively bore the VAT burden. This will be difficult if clubs can illustrate that they have absorbed the VAT themselves by accepting a reduced margin. If there is a market price for green fees (at a golf club) for example, the actual cost to non-members will remain the same, irrespective of whether or not the club is required to account for VAT on this income.
In relation to existing claims, HMRC intend to process those claims where clubs agree to reimburse the VAT to non-members and sign an undertaking to do so (although there seems to be little point in them doing this if they are not going to benefit).
If HMRC do attempt to invoke ‘unjust enrichment’, the litigation is likely to be ongoing as there is little point in submitting a claim (and suffering the additional restriction of VAT on costs), if the amounts recovered will have to be paid back to ‘customers’.
Any existing extant claims that are rejected on the grounds of unjust enrichment should be appealed.
New claims should be submitted as soon as possible as these are subject to the four year cap. If rejected on the grounds of unjust enrichment, this decision should be appealed.
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