Abbotsley Ltd; Cromwell Golf Club; v I Saunders and J Wisson (t/a Cambridge Meridian Golf Club)
| Jurisdiction | UK Non-devolved |
| Judgment Date | 11 December 2015 |
| Neutral Citation | [2015] UKFTT 662 (TC) |
| Date | 11 December 2015 |
| Court | First Tier Tribunal (Tax Chamber) |
Judge Swami Raghavan
Timothy Brown, counsel, appeared for the Appellants
Raymond Hill, counsel, instructed by the General Counsel and Solicitor to HM Revenue and Customs, appeared for the Respondents
Value added tax – Exemption – Affiliation fees paid to golf unions – ECJ's decision in Canterbury Hockey Club v R &C Commrs (Case C-253/07) [2008] BVC 824 applied – Fees exempt – Liability for fees was that of the clubs – Recharge to members not disbursement under law (no determination made on whether could be treated as disbursement under ESC) – Whether unfair distortion of competition – Applying ECJ decision in R & C Commrs v Bridport and West Dorset Golf Club Ltd (Case C-495/12) [2014] BVC 1 distortion inherent in exemption – Whether reference should be made to ECJ on legality of Value Added Tax (Sport, Sports Competitions and Physical Education) Order 1999 in view of distortion of competition between members golf clubs and proprietary golf clubs.
The First-tier Tribunal (FTT) heard appeals against a ruling by HMRC that affiliation to England Golf and to local golf unions was an exempt supply. The appellants also contended that the recharge of affiliation fees to their members was a disbursement and that the Value Added Tax (Sport, Sports Competitions and Physical Education) Order 1999 (SI 1999/1994) (the 1999 Sports Order) failed to properly implement the EU legislation. The FTT found in favour of HMRC that the affiliation fees were consideration for an exempt supply and that their recharges to members were not disbursements. It held that any distortion of competition arose from application of the exemption and declined the appellants' application for the matter to be referred to the ECJ for a preliminary ruling. Appeals dismissed.
The consolidated appeals were against decisions relating to the VAT treatment of affiliation fees paid by proprietary golf clubs to England Golf and to local golf unions contained in HMRC's letter to the appellants dated 27 February 2014. In particular, the appeals concerned: whether such fees were consideration for standard-rated supplies, as the appellants argued, or were exempt under VATA 1994, Sch. 9, Grp. 10, item 3 as claimed by HMRC; and whether when such fees were recharged by the appellants to their members they could be regarded as disbursements. The appellants argued three further issues: that if the supplies were standard rated, or if they were not disbursements when recharged, this gave rise to a distortion of competition between proprietary golf clubs and members' golf clubs; that the 1999 Sports Order had produced or exacerbated the distortion of competition between such clubs and did not correctly implement the provisions of EC Directive 2006/112/EC (the 2006 VAT Directive); and that the issue of the legality of the 1999 Sports Order should be referred to the ECJ for a preliminary ruling.
Under what is now art. 132(1)(m) of EC Directive 2006/112 (the 2006 VAT directive) EU member states are required to exempt from VAT certain services closely linked to sport or physical education supplied by non-profit making organisations to persons taking part in sport or physical education. The law was implemented in the UK by means of VATA 1994, Sch. 9, Grp. 10, item 3. That provision exempts: “The supply by an eligible body to an individual, except, where the body operates a membership scheme, an individual who is not a member, of services closely linked with and essential to sport or physical education in which the individual is taking part”. This provision was considered by the ECJ in the case of Canterbury Hockey Club v R &C Commrs ECASVAT(Case C-253/07) [2008] BVC 824 in which the court was asked to decide whether affiliation fees paid by the clubs to England Hockey fell within the exemption. The ECJ held that the supplies could only be exempt if they were “essential to the transaction exempted, namely sport or physical recreation”. In rejecting the contention of the UK that only natural persons were capable of participating in sport the ECJ held that in order to take account of the effective application of the exemption, regard had to be had not just to the formal legal recipient of the supply but to its material recipient or effective beneficiary.
The appellants did not take issue with the need to consider whether the “true beneficiaries” of the supply in question were persons participating in sport as set out in Canterbury Hockey and they agreed that the predominant service from the bundle offered in respect of affiliation fees was the right of the individual to have a Council of National Golf Unions (CONGU) handicap and, therefore, to play in serious competitions. However, the appellants argued that their facts were different and that the golfers were not true beneficiaries. Even if they were true beneficiaries then the appellants' position was that the supply in relation to handicaps was not essential for the sport. If they were wrong and the CONGU handicaps were essential, then they contended that the supply was exempt only in relation to those for whom it was requested and could not apply to those who did not benefit and had not paid for it. HMRC argued that the evidence was clear that this was not a case where the unions and regional associations were supplying anything of benefit to the proprietor; affiliation was beneficial to the golfers.
The primary issues for the FTT in relation to the liability to VAT of affiliation fees were whether the golfers were the true beneficiaries of the supply and, if they were, whether CONGU handicaps were essential to participating in sport. If the answers to both questions were in the positive, then the FTT must decide whether the supply could be exempt in so far as it was the case that golfers did not regard the CONGU handicap as a benefit or had not paid the fees.
The appellants' first line of argument that affiliation fees were not exempt because they were charged to the clubs and not to individual golfers was rejected by the FTT. In Canterbury Hockey it had been held that in order to take account of the effective application of the exemption, regard must be had not just to the formal legal recipient of the supply but to its material recipient or effective beneficiary. The true beneficiaries of the supply in question were the golfers; the persons participating in sport. It was not the case that affiliation fees were to be regarded as being supplied to the golfers. It was a supply which was made to the club but which was nonetheless prima facie exempt under Canterbury Hockey because the true beneficiaries were participants in sport.
The further question for determination was whether the CONGU handicapping system was “essential” to sport or recreation. Despite a proportion of members not regarding the facility to access the CONGU handicap as being essential to themselves that did not preclude the supply from being objectively essential to the sport. The facility of CONGU handicapping was undoubtedly of great assistance to the sport of golf. It enabled golfers to play competitively against each other and to have a handicap as required by the rules. However being of great assistance was in itself insufficient to make the service essential. Following the approach of the tribunal in British Association for Shooting and Conservation Ltd v R & C Commrs VAT[2009] BVC 323, the FTT observed that without the system of handicapping, the quality of the sport of golf would be of a materially poorer quality. The facility of offering a CONGU handicap became relevant as soon as one person wanted to play in a county competition and it was in that sense that the ability for the “true beneficiaries” to be able to access inter county competitions was essential to the sport.
The second issue for the tribunal was whether the fees could be treated as disbursements. However, both parties agreed that under the relevant law they could not be disbursements. The fees were not incurred by the clubs in the name of specific identifiable members and the responsibility for payment rested with the clubs rather than with individual members.
The next issue was whether, if the affiliation fees were not disbursements when recharged, this gave rise to a distortion of competition between proprietary golf clubs and members' golf clubs. The appellants' case was that there was a distortion of competition between proprietary clubs and members' clubs because while members' clubs could meet the payment of fees from exempt subscription income, proprietary clubs had to meet the payment from subscription income which was taxable. Also, the onward supply to members was taxable in the case of proprietary clubs but exempt when supplied by members' clubs. The FTT noted that the difference arose from the treatment of membership fees being the predominant element of a single supply. The ECJ decision in R & C Commrs v Bridport and West Dorset Golf Club Ltd ECASVAT(Case C-495/12) [2014] BVC 1 suggested that the difference was built into the exemption. The clear rationale which emerged from that decision as to why distortion of competition was not a valid reason for the UK to exclude members' club green fees from exemption was because this would undermine the scope of the exemption which provided for and envisaged a different treatment for profit making bodies and non-profit-making bodies. The difference in treatment existed but was inherent in the exemption and was intended by the Directive.
The final issue for the FTT was the appellants' contention that that the 1999 Sports Order was responsible for the distortion of competition and did not correctly implement the provisions of the 2006 VAT directive; and that the question of legality should be referred to the ECJ. Judge Raghavan observed that such reference was the...
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Abbotsley Ltd and Others v Revenue and Customs Commissioners
...Clubs' appeal dismissed. The Upper Tribunal (UT) dismissed the taxpayers' appeal against the decision of the First-tier Tribunal (FTT) ([2016] TC 04781) that VAT exemption applied to affiliation fees paid by golf clubs. Summary The appellant clubs charged affiliation fees to their members, ......
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O'Rorke
...to the approach taken by the tribunal in Abbotsley Ltd; Cromwell Golf Club; V I Saunders and J Wisson (t/a Cambridge Meridian Golf Club) [2016] TC 04781 such an important issue on the law should be considered by a tribunal in circumstances in which the facts would substantiate a conclusion ......