Keswick Golf Club; Silloth on Solway Golf Club; Carlisle Golf Club; Grange over Sands Golf Club
| Jurisdiction | UK Non-devolved |
| Judgment Date | 06 May 1998 |
| Date | 06 May 1998 |
| Court | Value Added Tax Tribunal |
VAT Tribunal
The following cases were referred to in the decision:
Becker v Finanzamt Münster-Innenstadt (Case 8/81) [1982] ECR 53
Glastonbury Abbey VAT(LON/95/2909) No. 14,579; [1997] BVC 2135
Kühne v Finanzamt München III VAT(Case 50/88) (1990) 5 BVC 127
Exemption - Sporting clubs - Whether charges to non-members for use of the club's facilities standard-rated or exempt - Whether UK law properly implemented eu-directive 77/388 article 13art. 13 of Directive 77/388, the sixth VAT directive -Value Added Tax Act 1994 schedule 9 group 10Value Added Tax Act 1994, Sch. 9, Grp. 10, item 3.
The issue was whether "green fees" paid by visitors to a golf club were standard-rated or exempt.
All four appellants were members's golf clubs. They were run for the benefit of their members who paid annual subscription for use of the clubs' facilities. Like most other members's golf clubs the appellants permitted non-members to play on the payment of a charge ("a green fee") and the aggregate of the green fees collected each year was about one and a half times the value of the members's subscriptions. It was acknowledged that the green fees so paid included an element of profit for the golf clubs. United Kingdom legislation provided that the supply by a non-profit making body to an individual of services closely linked with and essential to sport or physical education in which the individual was taking part was exempt. However, by Value Added Tax Act 1994, Value Added Tax Act 1994 schedule 9 group 10Sch. 9, Grp. 10, Note (2) an individual was not to be considered as a member of a non-profit making body unless he was granted membership for a period of three months or more. The appellant accepted that the wording of the UK legislation allowed no other interpretation than that the payment of green fees were consideration for a standard-rated supply.
The appellant argued that eu-directive 77/388 article 13(A)(1)art. 13(A)(1) of the sixth VAT directive had direct effect and that subpara. (m) enjoined member states to exempt certain services closely linked to sport or physical education supplied by non-profit making organisations to persons taking part in sport or physical education. This exemption applied to bodies other than those governed by public law provided that they did not systematically aim to make a profit, but any profits nevertheless arising were not distributed, but assigned to the continuation or improvement of the services supplied.
The commissioners contended that they were entitled to tax green fees because eu-directive 77/388 article 13(A)(2)art. 13(A)(2)(b) provided that the exemption for sporting services was not to apply if its basic purpose was to obtain additional income for organisations by carrying out transactions which were in direct competition with those of commercial enterprises liable to pay VAT at the standard rate. Since non-members playing golf on the golf courses could, and in many cases did, play on commercial golf courses which were not members's clubs, and where the exemption did not apply, the UK legislation correctly implemented the sixth VAT directive.
Held, dismissing the clubs' appeal:
1. The indent of eu-directive 77/388 article 13(A)(2)art. 13(A)(2)(b) provided for the exclusion of certain services from the exemption in subpara. (m). The definition of "certain services" in the indent remained with member states and since there was a discretion reposed in member states about what supplies were to be exempted and which were not subpara. (m) could not have direct effect.
2. European legislation was purposive and that a directive was an instruction to member states about what they must, may, and may not enact. The fact that the particular provision might not be capable of having direct effect did not relieve the member state of the obligation of giving effect to the directive and of doing so in a manner consistent with it.
3. The payment of green fees amounted to "additional income" within the meaning of that phrase in the indent in eu-directive 77/388 article 13(A)(2)art. 13(A)(2)(b).
4. The appellants were in competition with commercial enterprises and the charging of green fees was a means of generating additional income for the appellants. It followed that Value Added Tax Act 1994, Value Added Tax Act 1994 schedule 9 group 10Sch. 9, Grp. 10, item 3 correctly implemented the mandatory provisions ofeu-directive 77/388 article 13(A)(1)art. 13(A) and the requirement for the appellants to account for VAT at the standard-rate on green fees was correct. Accordingly, the appeal would be dismissed.
[The tribunal set out the facts summarised above and continued as follows.]
13. It is convenient at this point to deal with Mr Barlow's argument [for the appellants] that eu-directive 77/388 article 13art. 13 [of Directive 77/388] has direct effect in the UK, and Mr Paines' response [for the respondents] to that argument, before returning to consider whether Mr Barlow is right in his argument that there is inconsistency between the two legislative provisions. On this issue, Mr Barlow referred me to...
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