Tribunal finds in favour of private golf 

 clubs in major VAT hearing

By Alistair Dunsmuir 

The First Tier Tribunal has spectacularly found largely in favour of private members’ golf clubs about the repayment of VAT on green fees, in a landmark ruling.
The decision follows hearings in June and July of 2015 related to the quantum of unjust enrichment arising from the VAT repayments plus several technical VAT matters, and now paves the way for the government to pay millions of pounds back in claims to hundreds of golf clubs.
HMRC had claimed that private members’ golf clubs should be restricted to claiming 50 to 67 percent of the VAT back on green fees due to a process known as unjust enrichment, but the tribunal has ruled that the restriction should be just 10 percent, and this should apply to all claimant golf clubs.
“We are pleased to confirm that the tribunal has ruled that private members’ golf clubs had borne 90 percent of the cost of the VAT charge and therefore the amount that green fee claims should be restricted by is only 10 percent of the VAT overdeclared,” said a spokesman for accountancy firm KPMG.
“During the hearing, HMRC argued that the restriction should be 50 percent/67 percent whereas KPMG argued that the amount claims should be restricted by is five percent of the VAT overpaid.
“The tribunal decided that there was no basis on which to distinguish between different clubs, and that all clubs had borne 90 percent of the cost of the VAT charge.
“This is an excellent outcome and we are pleased that the tribunal have validated many of the arguments advanced by KPMG’s economist and legal team.”
With regards technical matters, the tribunal agreed with KPMG and ruled that if a club does not have corporate green fee income but does have buggy hire or tee advertising income, both of which are standard rated, this was sufficient for VAT on course maintenance costs to continue to be treated as ‘residual’ and eligible for partial recovery calculated by reference to a partial exemption method.
However, KPMG also argued that where a green fee relating to individuals playing golf was paid for on a corporate credit card this should still be treated as VAT exempt. 
KPMG had previously accepted that the green fee element of traditional corporate day packages should be treated as standard rated. Here, the tribunal agreed with HMRC and decided that in the event that green fees are paid by a corporate rather than an individual, these are subject to VAT at the standard rate.
In addition, the tribunal ruled that green fees charged directly to tour operators are subject to VAT at the standard rate. This only includes supplies where the tour operator is billed directly, that is buys in the green fee and supplies it on as principal and does not include green fees charged to individuals via a ‘true’ agent, for example tee times websites.
“Overall, we believe the decision issued by the tribunal is extremely positive for private members’ clubs,” said Paul Stewart, VAT director for KPMG.
“HMRC have a relatively short time to decide whether or not to appeal the decision, and must ask the First Tier Tribunal for permission to appeal within 56 days of the release of the judgment. If the First Tier Tribunal refuses then HMRC may ask the Upper Tribunal for permission within one month of that refusal. Our current view is that we will not be appealing against the findings of the tribunal.
“On the basis of the tribunal decision we have made immediate contact with HMRC to agree a process for adjusting the claims to take into account the unjust enrichment restriction and where appropriate, corporate and tour operator green fees and course maintenance VAT. 
"We will shortly be issuing a questionnaire to collect the additional information required to progress your claim. We would appreciate if you could refrain from asking questions in relation to this update as this will result in a delay in agreeing the process with HMRC and thereby a delay to progressing the claims.
“We will issue an update when we have further information and issue the questionnaire as soon as possible.”

.

KPMG VAT director Paul Stewart