Chipping Sodbury Golf Club and Others
| Jurisdiction | UK Non-devolved |
| Judgment Date | 30 August 2012 |
| Neutral Citation | [2012] UKFTT 557 (TC) |
| Date | 30 August 2012 |
| Court | First Tier Tribunal (Tax Chamber) |
[2012] UKFTT 557 (TC)
Judge David Demack, Judge Jonathan Cannan
Michael Sherry of Counsel instructed by Alan Rashleigh Associates appeared for the Appellant
Raymond Hill of counsel instructed by the General Counsel and Solicitor of HM Revenue & Customs appeared for the Respondents
VAT - sporting exemption for golf clubs - eu-directive 77/388 subsec-or-para A article 13Art. 13(A)(1)(m) Sixth Directive - members' subscriptions - single supply or multiple supplies - Card Protection Plan considered - held single supply - profit making proprietary clubs - whether entitled to exemption - no - appeals dismissed
The First-tier Tribunal decided that each of the taxpayers had made a single supply of services to the members and non-members alike of their establishments. In so far as the golf union fees had been identified separately on invoices to members and those sums had been accounted for to the relevant association, they were in the nature of disbursements. As such, they did not form part of any of the taxpayers' supply to their members and were outside the scope of VAT. Since none of the taxpayers had appealed on the basis that the restrictions introduced by the VAT (Sport, Sports Competitions and Physical Education) Order 1999 (SI 1999/1994) ("Sports Order 1999") had been applied so as to prevent it obtaining the benefit of the sporting exemption, there was no distortion of competition. Both parties had accepted that the proprietary clubs were profit-making bodies. Hence, it would be inappropriate to say anything about the lawfulness of the Sports Order 1999.
The taxpayer members' clubs ("Chipping Sodbury" and "Dyke") and proprietary clubs ("Trent Lock" and "Mendip Spring") (collectively, "the taxpayers") appealed against HMRC's refusal of their voluntary disclosure. The refusal was on the basis that output tax at the standard rate was due in respect of the whole amount of members' subscriptions.
Chipping Sodbury was a non-profit-making unincorporated association that provided in-house bar and catering facilities available to members and their guests. Each category of member other than social members paid union fees to the county association which also collected fees on behalf of Golf England. The non-members paying green fees were entitled to much the same benefits and services, save they were not able to enter club competitions, nor were they entitled to a membership bar-card. In the period 1973-1990, the right to enter club competitions was part of the package of benefits arising from membership and there was a separate charge on top of the annual subscription if a member entered a club competition. The members received a discount on the charge for use of club rooms.
Dyke was a company limited by guarantee and had an in-house bar and catering facility serving members, guests and visiting players. Its members received much the same benefits and services as Chipping Sodbury. In addition, they had an opportunity to purchase golf equipment from the retail shop on the premises at preferential rates. The non-members also received much the same benefits and services as non-members at Chipping Sodbury. The members could pay by 11 equal instalments and there was a small administration charge, and would pay entrance fees to enter club competitions. Union fees to the county association were shown separately on invoices to members and that included the fee to Golf England. Dyke then accounted for that to the county association. The attraction of joining Dyke was the quality of the course and the club competitions. Apart from that, some members would choose to enjoy the other facilities and benefits of membership whilst some members would choose not to do so. No discounts were given on the membership subscription if a member chose not to use certain facilities or benefits.
Chipping Sodbury and Dyke claimed for the repayment of £49,429 and £74,433, respectively, relating to their apportionment of annual subscriptions in respect of the period from 1 April 1973 to 31 December 1989. HMRC refused both claims. In the period since 1 January 1990, the subscription income of the members' clubs had been treated as exempt under the sporting exemption on the basis that they were non-profit-making organisations. They had been treated as making a single exempt supply in that period.
In addition to golf courses, driving range and golf shop, Trent Lock had bar, catering, conference and spa facilities available to the general public. There were various categories of membership with annual fees in 2012. Members received much the same benefits and services as Chipping Sodbury. The non-members paying green fees also received much the same benefits and services as non-members at Chipping Sodbury. The members had the option of paying subscriptions by instalments. Union fees were shown separately on invoices and zero-rated. Trent Lock claimed the repayment of £122,754 relating to the apportionment of annual subscriptions in the period from 1992 to 2008. HMRC refused that claim. Trent Lock had not made any claim that subscriptions should be treated as exempt in the same period. It had intended at some stage to claim all the VAT accounted for on members' subscriptions on the basis that it was exempt. Subject to that, its claim was the same in principle as those of the members' clubs, although its claim related to the periods after 1 January 1990.
On 23 March 2009 Mendip Spring claimed for the repayment of £444,415. That did not relate to apportionment of annual subscriptions, but was on the basis that there was a single exempt supply in the period from 1993 to 2008. HMRC refused that claim. Mendip Spring contended that the sporting exemption distorted competition between the members' clubs and the proprietary clubs.
The taxpayers explained that the different VAT treatment applying to the members' clubs and proprietary clubs gave rise to distortion of competition. They submitted that there were various separate supplies in consideration for the members' subscriptions. The supply of a right to play golf was completely different in nature from the right to use the clubhouse, to hire rooms or to obtain discounts in the bar. These were not ancillary to the right to play golf because they were not a means to the better enjoyment of golf. The taxpayers submitted that the separate elements were not closely intertwined. Social memberships were available which would give members all the benefits of membership other than the right to play golf. They pointed out that the subscriptions for social membership were not insignificant. Whichever analysis was used, therefore, the taxpayers submitted that there were several separate supplies. All the separate elements were not ancillary to the playing of golf because they were not a better means to enjoy the golf. Alternatively, they were not so closely intertwined that it would be artificial to split them up, and splitting them would not cause any distortion to the VAT system.
On behalf of the proprietary clubs, the taxpayers submitted that avoiding distortion of competition was part of the principle of fiscal neutrality. That principle precluded treating, in a different way, similar supplies made by suppliers in competition with one another. Member states could not introduce restrictions which went beyond the terms of the Sixth Council Directive of 17 May 1977 (77/388) ("the Sixth Directive"), eu-directive 77/388 subsec-or-para A article 13art. 13(A)(2). When implementing the sporting exemption, it was incumbent on member states to minimise the distorting effects of the exemption, and in particular the distorting effects of any restrictions on the availability of the exemption. The UK had breached those principles by restricting the exemption in the Value Added Tax (Sports) Order 1994 (SI 1994/687) ("Sports Order 1994") to non-profit-making bodies and by restricting the exemption to eligible bodies in the Sports Order 1999. Those restrictions had the effect of unlawfully distorting competition. HMRC submitted that the different treatment was expressly intended by the Sixth Directive.
The taxpayers further criticised the restrictions introduced in the Sports Order 1999 as going further than was permitted either by the opening words of the Sixth Directive, eu-directive 77/388 subsec-or-para A article 13art. 13(A)(1) or by the conditions in the four indents of Sixth Directive, eu-directive 77/388 subsec-or-para A article 13art. 13(A)(2)(a). They submitted that the restrictions of the Sports Order 1999 were part and parcel of the distortion of competition point.
(2) Whether the supplies of the members' clubs and Trent Lock in consideration for members' subscriptions were single or multiple supplies.
(3) Whether a restriction confining the VAT exemption to non-profit-making clubs was unlawful because it distorted competition and breached the principle of fiscal neutrality.
Held, dismissing the taxpayer's appeal:
In deciding whether a transaction which comprises several elements is to be regarded as a single supply or as two or more distinct supplies to be taxed separately, regard must first be had to all the circumstances in which that transaction takes place. Taking into account that every supply of a service must normally be regarded as distinct and independent and that a supply which comprises a single service from an economic point of view should not be artificially split, so as not to distort the functioning of the VAT system, the essential features of the transaction must be ascertained in order to determine whether the taxable person is supplying the customer, being a typical consumer, with several distinct principal services or with a single service (Card Protection Plan Ltd v C & E CommrsECAS (Case C-349/96) [1999] BVC 155, considered).
Here, the Tribunal accepted the taxpayers' submission that if no...
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