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10th October 2013
The Tribunal decision for North Weald Golf Club Limited is a salutary
tale for any not for profit organisations that make sporting supplies
and seek to treat the income as VAT exempt.
In order for supplies to be classed as VAT exempt, certain criteria
must be met. In the case of sporting services exemption can apply if
the supplier is an eligible body, this term includes a charity or a not
for profit organisation that is not under a commercial influence.
In the case of North Weald Golf Club Limited, the club treated its
sporting services as VAT exempt on the basis that it was an eligible
body for the purposes of the exemption as it was precluded from
distributing any profit that it achieved, or paying members of the
Company or trustees by way of profit. HMRC challenged this and issued
an assessment for VAT on the basis that it breached the criteria to be
an eligible body.
The appellant originally appealed on the basis that it was an eligible
body and that the assessment was made out of time. The appeal was
subsequently amended as it had took the decision to treat the sporting
services as subject to VAT and then ceased trading, however the
tribunal still considered the issue of it was an eligible body or not.
The Tribunal found that North Weald Golf Club Limited was not an
eligible body for the purposes of exemption as it was clear that the
intention from onset was set up the organization to “ring fence” the
sporting services within a VAT efficient structure, which is a
North Weald Golf Club Limited was a wholly owned subsidiary of a
business called Home Counties from whom it had bought part of its
business using a bank loan secured by debenture over the company’s
assets and undertaking including those of Home Counties.
The family members of the shareholder of Home Counties had been
appointed as club managers of the appellant. The appellant effectively
ran the golfing business for Home Counties’ members. In order to play
golf a member would pay his/her membership fee to Home Counties, before
paying North Weald Golf Club Limited for his golfing package. When
North Weald Golf Club Limited ceased trading its activities were
transferred to Home Counties at no cost, whereas it had acquired them
from Home Counties for £750,000.
The evidence therefore was that the effect of making the supplies in
question via a not for profit organization was to further the
commercial aims of the group as a whole. Both the appellant and Home
Counties were under control of the same individual. For this reason the
chairman found that the criteria for exemption was breached.
Whilst this case makes interesting reading especially for organisations
that have been set up for VAT planning reasons, it does also show how
highly complex this area is and how easy it will be for a non-profit
making organisation to coincidently breach the criteria for exemption to
If you act for any clients that make exempt supplies it is
worth contacting our free VAT helpline for an initial no obligation
discussion. It may be that your client has no exposure to account for
VAT, however timely advice can avoid or mitigate the risk of an
assessment for VAT interest and penalties of up to 100% of the VAT due.
About the Author
VAT People are leading VAT and Customs Duty
consultants based in the
North West of England. We work with a wide range of businesses
throughout the UK as well as assisting our accountancy colleagues to
unravel the thorny VAT issues for their clients. We are one of the UK's
largest and most comprehensive sources of VAT and Customs advice, our
consultancy team having over 140
years of experience in VAT and Customs
gained in either HMRC or a Big 4 accountancy practice environment.
Call us on our VAT helpline 0800 077 4604 to discuss. All initial discussions are free with no-obligation.
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Article Published/Sorted/Amended on Scopulus 2013-10-24 13:01:01 in Tax Articles
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