VAT - the supply of sporting facilities
Submit Articles Back to Articles
VAT, the supply of sporting facilities, land and horses – the nightmare
Originally published 16 July 2007
A recent case ‘Polo Farm Sports Club’ (20105) has highlighted the fact that
the whole area of VAT on sports facilities and indeed a lot of horse activities
could benefit from clarification by HMRC.
Access to recreational and sports facilities
The letting of land is an exempt supply for VAT purposes. The letting of
sports facilities and sporting rights are automatically standard rated for VAT
purposes. There are special rules for the use of sports facilities where there
are lets in excess of 24 hours or for the hire of facilities to the same user
for a regular series of events (both then become eligible for exemption but can
Within the definition of sports facilities for VAT purposes HMRC include
swimming pools, tennis courts and croquet lawns and areas of land that have been
specifically designed or adapted for sporting activities. However, if the
sporting facilities are let for non sporting purposes then the exemption will
apply. An example of this will be the letting of a swimming pool for a fashion
shoot which is an exempt supply.
Allowing access to recreational and sports activities is usually standard
rated, but there is provision that exempts the supply in respect of a series of
lettings, subject to tight criteria. One of these conditions is that each
particular letting must not be less than one day apart.
It suited the Polo Farm Sports Club (20105) to make standard rated supplies.
This was on the basis that input VAT could then be claimed. It had not opted to
tax the land in question. A dispute therefore arose with Revenue and Customs,
which said it was making a series of lettings which should therefore be exempt.
In this case the lettings were daily for several hours each day and there was
never a whole day between each letting. HMRC argued that this was nonetheless
sufficient to fulfill the exemption criteria, since there was still ‘a day’
between each letting. But the tribunal preferred the appellants view, which was
that there had to be at least a clear day, or 24 hour period, in order for the
rule to apply. The Polo Club was therefore making standard rated supplies.
Most providers of sports facilities would prefer the supply to be exempt.
Consequently, the decision creates difficulties where series of lettings arise,
with less than a whole day in between, where it has been assumed they were
exempt as long as there was no more than one letting per day. Are they now
deemed to be standard?
It is considered that HMRC should clarify this position and this could be
incorporated into the clarification question on the subject of the VAT on livery
On the subject of horses (yes the night “mare” was a pun in the title of
female horse) it is also considered that HMRC should review some of the possible
contradiction that exists with the VAT position on horse liveries and the
question of when the exemption applies.
Livery yards obtained a potential boost through VAT charged to clients with
minimum service (Business Brief 21/2001) was deemed to be exempt. However, it
comes with the downside of the “exempt” supply – not being able to claim back
input VAT and possible complexities of partial exemption.
Problems can arise in deciding whether schooling and breaking in are
provided. If the yard is mainly a specialist breaking yard, then any supply
relating to breaking in will be standard rated and the provision of livery
services will be ancillary to this and therefore standard rated. On the other
hand if the main purpose of the yard is livery with schooling or breaking as an
add on, then the entire supply will be exempt.
Where a horse is sent to a yard for the specific purpose of being broken or
schooled rather than as somewhere to keep the horse, then the supply will be
Supply of somewhere for the horse to live
Under the interpretation of the Business Brief, where there is a grant of a
right or a supply over land, then the supply of livery will be exempt regardless
of whether it is full livery or DIY livery as the supply is somewhere for the
horse to live.
This brief seems a contradiction to the basic principle of the grant of right
over land or the supply of land is exempt as the “full” livery by definition
means that the service is not ancillary to the supply of land. Full means a
horse being “fully” looked after. The result is that there is a variance in the
interpretation of “full”. In many establishments DIY and part liveries are
treated as exempt but full liveries are charged standard rated VAT as it is
considered that by definition the volume of the services provided do not fulfill
the basic principle of exemption criteria.
So how is the service provided? What is Part Livery?
Part livery is where the horse owner for example rides the horse five days a
week, but the livery provider rides and looks after it the other two days. It is
likely that the livery provider will be responsible for mucking out and looking
after the horse generally. Provision of hay and turnout may also be provided.
Part livery will generally be a trade.
The livery provider will be fully responsible for maintaining the premises
and the grass.
The livery provider will be responsible for feeding.
However, full livery is where the livery provider is responsible for the
complete care of the horse. The owner will come and go and the livery provider
should act in accordance with the owners wishes, but will be fully responsible
for the full care of the horse. Full livery will be a trade.
The potential loss of valuable CGT and IHT reliefs
Finding out that their DIY livery operation is not trading income can be a
shock for many land owners and farmers. If it is not trading income, then on the
sale of the underlying property it will be very difficult to claim business
asset taper relief under capital gains tax (CGT) legislation, or on death, or a
gift, business property relief for the purposes of inheritance tax (IHT).
Holdover relief from CGT on gifts may also be restricted.
The VAT complexities on the supply of land are a clear example of how all tax
planning surrounding farms and lands has to be comprehensive and looked at in
Drafting the Livery Agreements
With care, it should be possible to draft livery agreements that do not
create any right to occupy land or create any other right over the land.
The livery agreements should not give any exclusive right to rent one box or
any field. The yard owner should have the right to put the horse in any box in
the yard. The horse should be moved round from stable to stable at the
landowner’s discretion. Equally the horse should be able to be shifted from
field to field at the landowner’s wish.
The Animal Welfare Act 2006 – Will Livery Yards be Licensed?
The Animal Welfare Act 2006 came in to force from 6 April 2007 and this did
not include licensing livery yards. There had been much debate on the licensing
of livery yards, however the review is apparently delayed until October 2008
when the Government starts to consider secondary legislation.
Both livery yards and riding schools have been subject to some high profile
attempts at negligence claims. The relatively recent rejection of a claim on the
basis that jumping is known to be dangerous and falling off “happens” has given
hope to an industry that looked like it might have to seriously consider its
future viability to meet insurance cost/contributions.
Poly tunnel and the Supply of Land
The wet summer of 2007 has given cause for much use of the poly tunnel.
Whilst looking at VAT decisions on letting of land, what of that interesting
agricultural feature the poly tunnels? There has been a recent Tribunal which
helps to achieve clarity.
The VAT Tribunal has held that rentals paid under a lease of poly tunnels are
compulsorily subject to VAT at the standard rate. According to the Tribunal, the
lease was a lease or letting of land for VAT purposes, but was excluded from VAT
exemption because the poly tunnels amounted to “permanently installed equipment
and machinery”. The lease of a poly tunnel is therefore a standard rated supply.
Argents Nurseries Limited v HMRC VAT Tribunal March 2007.
It would appear that currently with any supply of land with some ancillary
trading situation, service or facility (e.g. shooting rights, days for polo,
full livery, part livery, DIY livery, poly tunnels, barns for storage, redundant
building for let) great care must be taken to establish the VAT charging status,
the impact on partial exemption and moreover the underlying protection of IHT
and CGT reliefs.
Another clear example that tax planning and land diversification can never be
looked at in isolation.
About the Author
Article supplied by Julie Butler F.C.A. Butler & Co, Bowland House, West Street,
Alresford, Hampshire, SO24 9AT. Tel: 01962 735544. Email;
Julie Butler F.C.A. is the author of Tax Planning for Farm and Land
Diversification ISBN: 0754517691 (1st edition) and ISBN: 0754522180 (2nd
edition) and Equine Tax Planning ISBN: 0406966540. To order a copy call Tottel
Publishing on 01444 416119.
Follow us @Scopulus_News
Article Published/Sorted/Amended on Scopulus 2008-01-09 16:06:16 in Tax Articles