A British private members’ golf club has been paid £5,000 after it won a landmark VAT ruling that could result in non-profit making clubs restructuring their membership offerings.
HM Revenue & Customs (HMRC) has accepted that the golf club – which does not wish to be named – overpaid VAT over more than three years on green fees that associate members purchased.
In 2009 the club set up the flexible / associate membership scheme in which golfers paid a small fixed fee to join the club and then paid discounted green fees whenever they wanted to play a round of golf.
Non-profit making private members’ clubs currently pay no VAT on members’ subscriptions, but do pay VAT on green fees, albeit this may be changed at a legal hearing later this year.
Last year the club appointed a team of accountants and VAT consultants from PKF to challenge the VAT it had charged on the green fees its associate members had bought. They stated that, according to the Value Added Tax Act 1994, VAT should only be levied to ‘an individual who is not a member’ of a sports’ club when they purchase green fees.
HMRC has now accepted the challenge. “From March 2009 Didsbury introduced an annual associate membership classification in which members pay an annual membership fee and then additional fees each time they use the course,” said an HMRC spokesman.
“Both sets of fees incurred by the associate members qualify for exemption from VAT under the VAT Act 1994. The annual fee has been correctly treated as exempt but the course fee element has been incorrectly treated as VAT inclusive.”
A spokesman for PKF said: “As a result of this finding, it is recommended that non-profit making clubs that don’t have these flexible or associate membership schemes should consider the implementation of such schemes as, in addition to the VAT benefit, there are clear commercial benefits in doing so.
“Clubs that have been operating these schemes and have paid VAT on the green fees can now make a claim for the VAT they have overpaid. Clubs are being advised to make a specific request to HMRC on an individual basis if they consider they would be eligible to make a claim.”
Last year Bridport & West Dorset Golf Club won a case against HMRC to claim back the VAT it had spent on green fees for non-members of the golf club, but HMRC appealed the decision, which is due to be heard this July. If the appeal is unsuccessful then private members’ clubs will be able to claim back four years of VAT paid on all green fees. However, even if the appeal wins, private clubs now know they can set up a scheme that makes them exempt from paying VAT on green fees.
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