The Bridport and West Dorset Golf Club Ltd
| Jurisdiction | UK Non-devolved |
| Judgment Date | 01 June 2011 |
| Neutral Citation | [2011] UKFTT 354 (TC) |
| Date | 01 June 2011 |
| Court | First Tier Tribunal (Tax Chamber) |
[2011] TC 01214
[2011] UKFTT 354 (TC)
Judge Colin Bishopp (Chairman)
Amanda Brown, non-practising solicitor of KPMG LLP, for the Appellant
Raymond Hill, counsel, instructed by their solicitor's office, for the Respondents
The following cases were referred to in the judgment:
Belgium v Temco Europe SAECASVAT (Case C-284/03) [2007] BVC 308
Canterbury Hockey Club & Anor v R & C CommrsECASVAT (Case C-253/07) [2008] BVC 824
Diagnostiko & Therapeftiko Kentro Athinon-Ygeia AE v Ipourgos IkonomikonECASECASVAT (Joined Cases C-394/04 and C-395/04)[2009] BVC 843
Kennemer Golf & Country Club v Staatssecretaris van Financiën ECASVAT(Case C-174/00) [2002] BVC 395
Keswick Golf Club; Silloth on Solway Golf Club; Carlisle Golf Club; Grange over Sands Golf ClubVAT No. 15,493;[1998] BVC 2,250
MacDonald Resorts Ltd v R & C CommrsECASVAT (Case C-270/09) [2011] BVC 171
Hoffmann (Re) (Case C-144/00)VAT [2005] BVC 41
RCI Europe v R & C CommrsECASVAT (Case C-37/08) [2010] BVC 833
Staatssecretaris van Financiën v Stichting Kinderopvang EnschedeECASVAT (Case C-415/04) [2009] BVC 860
Stichting Uitvoering Financiële Acties (SUFA) v Staatssecretaris van FinanciënECASVAT (Case 348/87) [1991] BVC 102
Exemption - Sporting services - Golf club green fees - Members' club charging green fees to non-members - Whether within exemption - Whether UK legislation fails to implement EC directive correctly - The 2006 VAT directive (Directive 2006/112), eu-directive 2006/112 article 132art. 132-134; Value Added Tax Act 1994, Value Added Tax Act 1994 schedule 9 group 10Sch. 9, Grp. 10, item 3.
The appeal concerned whether charges, known as "green fees", made by the appellant to visiting non-members in order to play golf on its course were consideration for a VAT-exempt supply. There were, in addition, two subsidiary issues: whether part of the appellant's claim was precluded by the operation of the, then, three-year capping provisions; and whether any sum found to be repayable would attract compound interest. The tribunal was not asked to make an immediate decision in respect of the subsidiary issues, since the principles were to be tested in other appeals.
The appellant was a private company, one of whose objects was described in its Memorandum and Articles of Association as the provision of facilities for the playing of golf. The appellant was an "eligible body" within the meaning of the Value Added Tax Act 1994, Value Added Tax Act 1994 schedule 9 group 10Sch. 9, Grp. 10, Note (2A). The golf course and clubhouse were provided by means of a members club which had existed since 1891 and which had a membership of approximately 700. The club was an unincorporated association which had no legal identity distinct from the appellant. The appellant was also a Community Amateur Sports Club (CASC) within the meaning of the Corporation Tax Act 2010, Corporation Tax Act 2010 chapter 9Ch. 9. Golfers paying green fees had exactly the same playing experience as members and were able to use all the facilities of the club, although members had some additional rights, including discounts in the bar and at the driving range, entitlement to enter some club competitions and voting rights.
In 2009, the appellant made a voluntary disclosure to the commissioners, by which it sought to recover VAT of £140,358 previously declared as output tax on green fees. The commissioners rejected the claim and maintained that the green fees were standard-rated income because the granting of playing rights to non-members did not satisfy the terms of item 3 of Grp. 10, which provided VAT exemption for the supply of sporting services by an eligible body to an individual except, where the body operated a membership scheme, an individual who was not a member. Note (2) to Grp. 10 stipulated that an individual could be considered a member for such purposes where he was granted membership for a minimum period of three months. The appellant contended that the UK legislation was inconsistent with European Community law, since it discriminated between supplies to members and to non-members. Accordingly, the appellant said that item 2 was ultra vires and could not be relied on by the commissioners. The commissioners maintained that the distinction drawn between members and non-members was required by the terms of eu-directive 2006/112 subsec-or-para b article 134art. 134(b) of the 2006 VAT directive, as the basic purpose of charging green fees was to obtain additional income for the organisation by carrying out transactions which directly competed with those of commercial enterprises liable for VAT.
The appellant relied on the decision of the European Court of Justice in Kennemer Golf & Country Club v Staatssecretaris van FinanciënECAS (Case C-174/00) [2002] BVC 395. It referred the tribunal to the court's observation that the purpose of certain exemptions, including the sporting exemption, was to provide more favourable VAT treatment for organisations whose activities were directed towards non-commercial purposes. The aim of the exempting provision in this case was the encouragement of participation in sport, but that aim was extended to services closely linked to sport. The appellant submitted that, however common it may be for golfers to be members of a club, this was not essential to the playing of golf. The UK's implementation of the directive, by discriminating between members and non-members, elevated membership to a role it could not legitimately play and used it as a criterion which bore no relation to the activity which was the proper subject of the exemption. The substance and economic effect of the grant of the right to play golf in return for a green fee was indistinguishable from the substance and economic effect of the grant of the right to play golf in return for a subscription.
The commissioners also relied on Kennemer Golf & Country Club. They submitted that by the answers given to the referred questions in that case it was apparent that the green fees in issue were not covered by the exemption. The first question was whether a body's non-profit making status was to be determined by reference only to its income from exempt activities or by reference also to other income. The court found that account must be taken of all the activities, including those provided by way of extension to the exempt services. According to the commissioners, that conclusion proceeded from the premise that green fees represented consideration for a supply which was provided by way of extension to the services covered by the exemption. In other words, the court considered such supplies to be outside the exemption. The commissioners also cited the tribunal's decision in Keswick Golf Club No. 15,493; [1998] BVC 2250 in which precisely the same question arose, namely whether green fees charged by a non-profit making club to non-member players were exempt. The tribunal had sided with the commissioners in that case that income derived from making supplies to non-members was "additional" income and outside the exemption. The commissioners submitted that the appellant's argument that so long as the beneficiaries of the relevant services were persons taking part in sport the exemption should apply left no room for art. 134(b) to apply to any services supplied by non-profit making organisations.
In the view of the commissioners, the decision of the European Court in the case of Canterbury Hockey Club v R & C CommrsECAS (Case C-253/07) [2008] BVC 824, which was the decision giving rise to the appellant's disputed claim, did not affect the requirement that the basic purpose of the provision of the relevant services must not be to obtain additional income for the relevant non-profit making body by carrying out transactions in direct competition with commercial enterprises. It was this factor which justified the distinction in the UK legislation between supplies to members and supplies to non-members, since the right to play golf in return for a green fee was available not only from non-profit making organisations, but also from commercial concerns. It was in order to stop the distortion of competition which would result if green fees charged by the appellant and the like were exempt, while commercial concerns were required to charge VAT, that the legislation incorporated that distinction.
Held, allowing the company's appeal:
1.The analysis set out by the tribunal in the Keswick Golf Club decision was unduly restrictive. The appellant's green fee income could not properly be described as "additional" when derived from an activity included in the principal objects of the Memorandum of Association, when received year after year and when applied in the same way as subscription income in defraying the appellant's ordinary expenses of maintaining the golf course and clubhouse.
2.In principle, the exemption extended to all relevant supplies "to persons taking part in sport". The restriction of the exemption to only some such persons was, therefore, contrary to the purpose of the exempting provision and could not have been the result for which the commissioners contended.
3.The provisions of UK law which distinguished between supplies to members and supplies to others were not capable of properly achieving the objective of eu-directive 2006/112 subsec-or-para d article 133art. 133(d) of the 2006 VAT directive and were ineffective. Accordingly, the directive had direct effect.
4.The appellant's green fee income represented consideration for an exempt supply.
5.The parties were given permission to apply for the hearing to be continued in order that the two other issues, relating to the three-year cap and whether the sum repayable would attract compound interest, could be determined.
1.The principal question in this appeal is a seemingly simple one: are the charges, known as "green fees", made by the appellant, the...
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