David Cameron asked to review his club’s tax affairs
By Emma Williams
The founder of the Association of Golf Course Owners (AGCO) has called on the prime minister, David Cameron, to review the tax affairs of a golf club he is a member of.
Vivien Saunders OBE, a former British women’s golf champion who now owns two golf clubs and has campaigned on tax issues in golf for a number of years, has written an open letter to David Cameron.
In it, she claims that Ellesborough Golf Club in Buckinghamshire “may be escaping the tax they owe and may have escaped it for many years”. On the register of members of parliament’s interests, the prime minister declares that he has accepted honorary membership of the club, worth £1,221 per year. Ellesborough has offered honorary membership to every prime minister for the last 100 years.
Saunders, who has accused a number of leading private members’ golf clubs of tax evasion over the last 20 years, says that members of the club do not have to pay VAT on their subscriptions, because it is a ‘non-profit making’ venue. However, she added that the club competes with proprietary golf clubs, where members do have to pay VAT on subscriptions, for visitors’ green fees, which, she said, “is distortion”. She also said that the club uses an accountant that has boasted that it has reduced some golf clubs’ taxable income “to zero”.
“Less well-to-do golfers at nearby Aylesbury Vale Golf Club pay VAT,” she wrote. “Clubs like Ellesborough trade on the open market for visitors and golf societies, advertising their wares on the internet and in various publications.
“A visitor’s fee at Ellesborough is £48 for a round or £72 for a day. We are not aware of Ellesborough’s disclosure of these earnings or the tax they pay. Their auditors / accountants are Hillier Hopkins, who proudly say that they act for over 30 golf clubs and ‘have in almost all cases been able to either agree mutual trading status or a profit calculation method which reduces taxable income to zero’.
“From that we assume that Ellesborough Golf Club may be escaping the tax they owe and may have escaped it for many years.
“We now ask that you review the way in which their tax is dealt with.”
Andy Hayes, general manager of Ellesborough Golf Club, responded to the letter by saying: “I can confirm that our affairs conform to the rulings and guidelines of HMRC.”
Saunders also said that some private members’ golf clubs bring in hundreds of thousands of pounds in untaxed green fee income each year, because visitors are treated as ‘temporary members’ and therefore exempt from the tax.
“The term ‘temporary member’ is used by clubs to disguise their trading income from prying eyes,” she wrote.
“We say it is evasion. Trade and pay the tax you owe, or shut your doors.”
Saunders has asked several AGCO members to forward the letter to their MP, so that a number of ministers will be aware of her comments. Last year she met with David Gauke MP, exchequer secretary to the treasury, to discuss what she calls ‘VAT distortion in golf’.
Not all in the industry agree with Saunders, however. A spokesman for one private members’ golf club said: “The argument that proprietary golf clubs lose out to private clubs is flawed because it overlooks a fundamental point regarding the ability to claim back input VAT incurred on operating costs.
“A proprietary club as a registered business can offset all input VAT incurred.
“A private club is only allowed to reclaim a proportion of VAT incurred that typically amounts to 30 percent. Because this is a cost to be borne, club subscriptions have to be increased to cover the amount.”
By Emma Williams
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If a private members club is private and only open to members and their guests then I don’t have a problem with VAT exemption, but as we all know there a very few clubs that are like that. There is no difference between most clubs now with how they trade, all competing for the same business. So in my opinion it would only be fair for all clubs to be taxed the same.
When most of the new courses where built the Tax and VAT issue was not a problem as private members clubs where just that. I’ve just entered our postcode into tee off times, in a 25 mile radius are 45 private members clubs selling tee times and 22 proprietary clubs. I suspect this would be similar up and down the country.
Vat was not 20% then, it might have been 8% in 1976. Even the shift from 17.5% to 20% might look insignificant but that 2.5% equals about £25,000 to many golf clubs, that was enough to take us from breaking even to making an £11,000 loss. We have a cracking course and record numbers, good membership numbers but no one can go to work, do well and lose money. The upshot is We lost 11,000 whilst the government got £328,000 in rates, vat and various taxes on aggregates and beer sales. We employ 30 people. If we closed down they would lose that, I would probably get more turning it to pony paddocks. They should be helping and aware that they are dealing with a ‘straws and camels back situation’. A fair platform is all that is asked. John can I ask you a straight question “Do you think it is right as it is, that one club is Vat exempt and another is not?”.
Many (perhaps most) Private Members Golf Clubs are no longer operating as Private Clubs. They are Public Golf Courses during the week with the profits from visitors (on which they are currently evading Corporation taxes) used to subsidise Members annual subscriptions which would otherwise be much higher. On weekend mornings they revert to Private Clubs when the Members play their golf.
The rules to tax profits on Visitor Income at Members Clubs are long established but the Members Clubs are not paying any Corporation Tax by fiddling their books in the following ways
a/ calling their visitor income “temporary memberships”
b/ calling their visitor income “Members guest income” – (which is not taxable)
c/ under reporting their visitors income
d/ understating their Members number of rounds in order to allocate a higher percentage of expenses against visitor income
e/ over allocating expenses against this visitor income to create the illusion they are losing money on visitors.
f/ some combination of the above
The problem is that they have been fiddling the books this way for so long and getting away with it that they dont see what they are doing wrong.
We all Know that Green Fee income is very very profitable income. Almost pure profit ! For these clubs to be claiming they are making no profit from it is insulting and dishonest. The largest and best known private clubs in the land are the worst offenders aided and abetted by their Accountants. Some Clubs are taking millions in visitor income and paying no Tax. Most in the South are taking £50k -£200k from Visitors and paying no Tax. HMRC has been hoodwinked by these rogues and has not had the resources or the inclination to challenge Clubs corporation tax returns. And Members Clubs are notoriously lax at keeping proper records of the split between Member and Visitor revenues because this helps them if they are ever queried by HMRC who are perhaps inclined to believe the rough estimates given by the bumbling (but very charming) Club Secretary.
It is kicking off now because Members Clubs are now much more aggressive at pursuing Visitor business than ever before. The Tee Time resellers like teeofftimes.com and onlineteetimes.co.uk have more Private Clubs as clients than proprietary clubs. This increased commercial focus on Visitor income has hit proprietary clubs number of rounds very hard. In our case we have lost 25,000 midweek rounds per annum in the last 20 years to Private Clubs in our area none of whom are paying any Corporation Tax. By contrast around 4.5% of our Gross revenues excl Vat is paid in Corp Tax meaning HMRC (as a rough estimate) receives approximately £17,000 per annum less in Corp Tax than it would if those 25,000 rounds had not moved to Private Clubs – and none of the Private Clubs around us like Finchley or Muswell Hill or Mill Hill all pay any Corp Tax. Most of them are also getting the obscene CASC relief on rates.
We have no Problem with Private Clubs being Private Clubs. But when they are Public Courses in disguise we want them to be taxed as businesses as the law currently provides. The rules at present are just not being enforced by HMRC on CTax or CASC and the abuse is rampant. Hence Vivian’s very sensible request that David Cameron look into his clubs affairs. Members Clubs currently claim to be not making money from their Visitor Income – in which case they should shut their doors and not accept visitors. Go back to being Private Clubs like they used to be.
Why dont they do this ? Because Members subs would have to rise substantially to cover to cover the shortfall if they stopped touting for Visitors. Because in reality this Visitor Income (which is taxable but on which they have been paying no tax for years) is very profitable even though they will not admit it.
Dear Viv
You bought a golf club to make a profit as a business. You knew the tax/VAT consequences. Stop bleating.
I dont see how any logical person can see anything different than ‘all golf clubs should compete on the same fair terms’. If one has to charge VAT then so should the other. It should be more like if you are a member of the EGU then you get treated the same, member clubs and proprietary all live together and you cant trade against what amounts to a 13% Vat distortion (I accept the arguement its not a full 20% since members club cant claim any vat back, equally as pointed out most of the cost of running a golf club is in wages, rates, insurance and utilities which are no vat or very low vat). All golf clubs should pay corporation tax if there is a surplus, in real terms member clubs balance the books the treasurer and finance committee equal the costs of running the club by setting the subscription level.
Running golf clubs is a labour of love, a golf club worth say £3,000,000 does not make £450,000 of profits, it is almost impossible, the only real way to make big profits from a golf club are the add on’s like hotels and weddings, conferences…those things are clearly not golf and should be taxed as normal. I have never ever spoken to anyone face to face that actually thinks the current situation is right that members clubs get those breaks whilst proprietary clubs dont, I know the inland revenue will acknowledge off the record its wrong as it is.
The secret may be more simple and proprietary clubs need to make themselves members clubs and act the same as members clubs do, the owners rent the golf club and the owner becomes the landlord. That situation is no different than many current situations where a golf club has a landlord. The owner can still run the golf shop, or the clubhouse. A golf club and all within it does not have to be a single unit, various parts can be franchised.
Vivien Saunders is always trying to turn this issue into a ‘them and us’ one. The ‘posh’ clubs angainst the clubs of the people. Most membership clubs are owned by the people.
This is a blatant attempt by Ms Saunders to get publicity for her cause by involving David Cameron.
These ‘posh’ clubs are the same as all private members clubs. Why does she pick on them? For the same reason people pick on ‘fat cats’ and ‘posh people’, if you pick on the rich you get the millions of lazy scroungers and jealous people to back you!!!
Profit made and then re invested in to the club, whether that is on development of the course the club house of reduction of subs, is a surplus. The purpose of the EU regulations on membership sport is to keep the money in the sport and not pay it out in dividends to shareholders. If you want to run a club for personal financial gain, then you can, and therefore pay taxes like any other business. If however you run a club for the benefit of all the members to encourage participation in sport, then you ‘benefit’ from the VAT partial exemption rules. If she wants the same status for her club, make the same commitment and she can have the same status. Or does she want to stay the same because she wants to take a dividend out of the sport, to buy a ‘posh’ house or a ‘posh’ car?
These clubs do pay tax on green fees, VAT. There again it is complicated and I doubt a 8 year old child, your delinquent teenager or your 90 year old grandfather would understand! I’m not sure Ms Saunders does either!
The tax rules seem unfair to the proprietary club owners who see these membership clubs as competitors. The truth is, those golf businesses who offer something different, don’t seem to compete with the ordinary membership clubs. The ‘posh’ examples include Wentworth, Woburn, Celtic Manor, Gleneagles, the Belfry. Why does Ms Saunders never use these examples? Those clubs offer something different and the others don’t.
I see this argument as similar to a shoe shop owner, who opened in the 1990s next door to a Oxfam shop (that had been there 100 years) They are now complaining about that shop’s charitable status! The shoe shop opened because, in the 90s when there was lots of demand for shoes (demand created by the Oxfam shop), they could make lots of profit and buy new ‘posh’ cars for themselves. Now things are difficult and their customers are leaving, there isn’t the business for both of them. The truth is, without the farmers field of a golf course next door, the Oxfam shop would do very well.
Maybe it’s time for the membership clubs to complain about the oversupply, created by greedy farmers, no longer happy with their EU layaway subsidy, building courses in the 80s and 90s for a quick buck! Maybe someone should point out that (in my opinion quite unfairly) many of these businesses used the EU farming subsidies (taxpayers money) to build these clubs, that now take their members.
The spokesman for the private members club states that proprietary clubs can reclaim VAT ,no comment was made about the corporation tax that members clubs do not pay which is considerably more than VAT. We only want to be treated tax wise the same as members clubs. Either make them pay VAT and corporation tax ,or stop levying it on Proprietary clubs.
You can’t run a business without making a profit or you go bust, members clubs hide their profits.
Member’s clubs put the profit back in to the game, proprietary clubs aim to pay a dividend.
When the LTA makes a profit at Wimbledon they don’t pay tax because they put the money back in to sport.
I think this argument is all about intentions. If you set up a business intending to make profit for your shareholders, you pay tax. If you set it up for the purpose of encouraging the participation in sport, you don’t.
The golf business, wasn’t a business until business people turned it in to one. Now they moan because they can’t make money against the established membership clubs.
We’ve heard it all before! It’s boring. Stop blaming the TAX rules and get on with making your money and draining it from the sport.
Some of the biggest expenses for any proprietary club are Labour costs, Insurance, Rates (which are paid in full due to not being on CASC), finance charges etc, no VAT can be reclaimed on these. As I’m sure most clubs will agree with, VAT reclaimable items such as machinery and course expenditure are now much smaller than ever before.