Clubs hope for six figure windfalls

The chair of the Association of Golf Course Owners (AGCO) believes that the average private members’ golf club could receive over £100,000 back in overpaid VAT if Chipping Sodbury Golf Club wins its legal case against Her Majesty’s Revenue and Customs (HMRC) later this month.

Vivien Saunders OBE has also stated that proprietary clubs could receive an even bigger refund on average. However, she added that most golf clubs are confused about the case, particularly because it involves apportioning VAT.

On May 28, Chipping Sodbury Golf Club will argue at a VAT final hearing that club membership is made up of a ‘package of services’, of which between 30 and 52 per cent is the provision of a facility for the ‘playing of sport’. Under EU law, this would mean that that aspect of membership is exempt from VAT. However, at the same hearing, HMRC is set to argue that club membership consists only of one ‘single service supply’, which would mean that the relevant European legislation does not apply to it.

If Chipping Sodbury wins then private members’ clubs could recover some of the VAT paid on membership subscriptions between 1973 and 1990.

“Members’ clubs are looking for something like £70,000 each in repaid VAT, plus some interest,” said Saunders. “We are talking about more than £100,000 a piece.”

In addition, proprietary clubs could recover some of the VAT paid on all their membership subscriptions since 1990, which is when private members’ clubs were first allowed to offer VAT-exempt subscriptions, potentially an even bigger windfall than the sums private clubs could reclaim.

Saunders compared the potentially historic ruling with how VAT used to be applied to membership fees of the AA, which are now apportioned.

“Many years ago, in the days when the AA had men on motorbikes saluting at the members, they charged a membership fee,” she explained. “It was standard-rated for VAT. Then a clever person realised that much of that sub was for the handbook, keys to the AA box and so on. The handbook, as all books, should have been zero-rated. So the sub should not have been standard-rated in total. It was apportioned.

“This is what the Chipping Sodbury case is all about. It can be argued that the golf subscription to all golf clubs has an element, such as the diary, certain prizes and buggy hire, which should not be standard-rated.

“As private members’ golf clubs got their VAT exemption in 1990, apportionment since then is of no consequence for them – but it is relevant to proprietary clubs. That’s why the case affects both types of clubs, albeit in different ways.

“In addition to apportionment, there is the issue of distortion between the two types of golf clubs. I have put in a witness statement in my capacity as chairman of AGCO, and on behalf of Trent Lock GC, Mendip Springs GC and my own club, Cambridge Meridian GC, reciting this industry-wide problem.

“It explains all the anomalies and the similarity of the membership experience at member-owned and proprietary clubs.

“The distortion issue will hopefully sort things out for the future but might not get us compensation for the past. Who knows?

“But what we do know is that if the claim for apportioning the subscriptions is successful, pay backs for all golf clubs could be substantial.”

AGCO is currently raising funds to pay for a tax barrister, Michael Sherry, to represent proprietary clubs at the case. If they do not raise the £72,000 necessary, then, added Saunders, those clubs will still be represented by a VAT specialist, believed to be Alan Rashleigh.