1 GENERAL NEWS
1.1 Jersey removed from the French Non-Cooperative State or Territory (NCST) list
The Jersey Tax Authority has officially announced the removal of Jersey from the French Non-Cooperative State or Territory (NCST) list.
www.gov.je/News/2013/pages/FrenchBlacklistRemoval.aspx
1.2 HMRC Litigation & Settlement Strategy and governance for settling tax disputes
HMRC's Code of Governance for resolving tax disputes has been updated to include the remits of the business case boards and issues panels.
Each line of business (Enforcement & Compliance, Business Tax and Specialist Personal Tax) has a governance board for reviewing large and sensitive cases within that area.
Where an issue is identified that has a far-reaching impact across multiple taxpayers it is referred to a Contentious Issues Panel (CIP). CIPs decide the departmental strategy for handling these major contentious issues. The Anti-Avoidance board provides oversight of how avoidance issues are worked across the department.
www.hmrc.gov.uk/news/taxdisputes.htm
1.3 New designated stock exchange
With effect from 20 December 2013, HMRC has designated the market operated by The Channel Islands Securities Exchange Authority Limited as a recognised stock exchange under Section 1005 (1) (b) Income Tax Act 2007.
Securities admitted to trading and listed on this market will meet the HMRC interpretation of 'listed' as set out in Section 1005 (3) Income Tax Act 2007.
With effect from 20 December 2013, the market will also be regarded as a recognised stock exchange for Inheritance Tax purposes.
www.hmrc.gov.uk/fid/rse-new.htm
2 PRIVATE CLIENT
2.1 HMRC Spotlights
HMRC has added a new Spotlight as follows:
Update on Contractor Loan tax avoidance schemes
The First-tier Tribunal comprehensively and robustly dismissed all the arguments put forward by an IT contractor to persuade them that his contractor loan tax avoidance scheme worked and the money he received was not taxable. In Philip Boyle v HMRC the tax tribunal judge decided that the money paid over to Mr Boyle as loans was 'in substance and reality income from his employment' and therefore taxable.
This tax tribunal decision means that the contractor has to pay tax on the loans.
Mr Boyle argued that if he had received income from his employment, it should have been taxed under PAYE by the offshore company and that he should not have to pay. The judge dismissed that argument as well. She also decided that even if the money Mr Boyle received under the scheme was not income from employment, he would still have to pay tax as a result of specific rules to prevent tax avoidance known as the 'Transfer of Assets Abroad' rules.
Tax avoidance scheme promoters sold contractor loan schemes with a variety of different features but they all involved individuals signing an employment contract with an offshore company and receiving a large proportion of their income in the form of a 'loan' from their employer - either directly or through an intermediary. In September 2013 we said that we were challenging these schemes. Many people have received tax assessments, or letters opening enquiries, and we are continuing to issue more and to pursue the tax which should be paid.
2.2 Statutory Residence Test
HMRC has updated its guidance note on the new statutory residence test, replacing the version published in August 2013.
Changes include additional clarification on UK day counts and transit days and corrections on overseas work days and Case 6 criteria for split-year treatment.
www.hmrc.gov.uk/international/rdr3.pdf
2.3 Tax Residence Indicator Tool
HMRC has released an updated version of the Tax Residence Indicator Tool.
http://tools.hmrc.gov.uk/rift/
2.4 Consultation on transfer of assets abroad legislation
HMRC has issued a response document to their consultation on reform of the transfer of assets abroad legislation. Some of the general points raised by respondents are set out below.
- The issues underlying the matching rules are complex.
- Because of the complexity of the transfer of assets regime, amending the matching rules in isolation brings the risk of unintended consequences of unfairness and also new opportunities for avoidance.
- There was support for a pragmatic way forward for improving clarity and certainty of the matching rules by improving HMRC guidance rather than attempting legislative change in Finance Bill 2014.
- There was appreciation of the clarity provided by the draft guidance but further work was needed to provide greater certainty.
- The regime is outdated and requires comprehensive review.
- The draft guidance on the matching rules does not reflect HMRC's practice in applying the rules.
- Some issues may be difficult to resolve through guidance.
HMRC will not undertake reform of the matching rules or wholesale reform of the legislation at this stage. However to achieve the aim of providing greater clarity and certainty in the operation of the current legislation, HMRC has said it will continue to work closely with members of the working group to develop improved guidance on the matching rules.
HMRC will also continue to work with members of the working group to develop improvements to the wider draft guidance.
2.5 Eclipse 35 Film Partnership
The Upper Tribunal has considered the appeal by the Eclipse 35 Partnership against the decision of the First-tier Tribunal.
The Upper Tribunal dismissed the partnership's appeal on the trading issue, but allowed its appeal on a minor and essentially technical point, that the FTT should have allowed the appeal against the closure notice on the footing that Eclipse 35 was carrying on a business involving the exploitation of films with a view to profit:
2. Eclipse 35 is a limited liability partnership. The closure notice referred to Eclipse 35's tax return for the period ended 5 April 2007 and included the determination that Eclipse 35 "carried on neither a trade nor a business and there was no trade or business carried on with a view to profit." It was this determination which Eclipse 35 appeals against. It does so on the ground that it maintains that in the relevant period it carried on a trade with a view to profit.
3. The FTT held that Eclipse 35 did not carry on a trade in the relevant period. It is against this ruling that Eclipse 35 appeals to the Upper Tribunal.
4. The FTT also held that the activities of Eclipse 35 in the relevant period amounted to "a business involving the exploitation of films which does not amount to a trade", that is, a "non-trade business" within section 609 of the Income Tax (Trading and Other Income) Act 2005 ("ITTOIA"). The FTT was of the view that Eclipse 35's activities, if they had amounted to trading, were carried on with a view to profit. There has been no appeal by either party against these parts of the FTT's decision.
5. As emerged at the hearing before the Upper Tribunal, the logic of the FTT's conclusions is that, even taking account of its ruling that Eclipse 35 did not carry on a trade, it should have allowed the appeal against the closure notice on the narrow basis that in the relevant period Eclipse 35 carried on a business with a view to profit. Both parties agree that if Eclipse 35's appeal to the Upper Tribunal on the issue of carrying on a trade fails, the Upper Tribunal should nonetheless allow the appeal on the limited ground that HMRC erred in their determination in the closure notice that Eclipse 35 did not carry on a business with a view to profit.
6. In my judgment, that is the proper outcome of this appeal. For reasons which I set out below, I dismiss Eclipse 35's appeal on the trading issue. However, I allow the appeal against the closure notice and the FTT's decision on the narrow ground that in the relevant period Eclipse 35 carried on a business with a view to profit.
www.tribunals.gov.uk/financeandtax/Documents/decisions/Eclipse-Film-Partners-No35-LLP-v-HMRC.pdf
2.6 Tax charge on withdrawal of approval of a retirement benefit scheme
In the case of John Mander Pension Scheme Trustees Ltd v HMRC the Court of Appeal has unanimously confirmed the previous decisions of the First-tier and Upper Tier Tribunals that assessments raised on the trustee of the pension scheme (acting as administrator to the scheme) in 2000 and 2007 in respect of the 2000/01 tax year were raised in respect of the correct year.
The taxpayer had contended the tax arose in the 1996/97 tax year and that the assessments raised in 2000 and 2007 were incorrect. The tax charge (40% of the value of assets immediately before deregistration) was imposed by what was ICTA s591C (de- registration charges are now provided in FA04 s242).
www.bailii.org/ew/cases/EWCA/Civ/2013/1683.html
3 PAYE AND EMPLOYMENT MATTERS
3.1 Offshore employment intermediaries
HMRC has published draft guidance as part of the consultation on proposals to strengthen legislation where there is an offshore employment intermediary. The draft guidance is dependent on the legislation getting Parliamentary approval and could change before it comes into force.
www.hmrc.gov.uk/drafts/nim-guidance.pdf
www.hmrc.gov.uk/drafts/draft-esm-manual.pdf
To support the draft guidance, HMRC has also published a technical note and some frequently asked questions, which can be downloaded from the links below.
www.hmrc.gov.uk/drafts/draft-oei-guidance.htm
www.hmrc.gov.uk/drafts/offshore-faqs.pdf
3.2 Real Time Information
Following the announcement on 9 December 2013 detailing a package of help for micro employers as they move towards full reporting of PAYE information in real time, HMRC has published for external comment draft Statutory Instruments making amendments to the Income Tax (Pay As You Earn) Regulations 2003 (the 2003 Regulations) and The Social Security (Contributions) Regulations 2001 (the SSCR 2001) with accompanying Explanatory Memoranda.
www.hmrc.gov.uk/drafts/paye-ss-regs-amends-2014.htm
3.3 Class 3A NIC
In the Autumn Statement 2013, the government announced its intention to introduce a scheme to allow pensioners to top up their Additional State Pension by paying a new class of voluntary National Insurance contribution, to be known as Class 3A.
The scheme will open in October 2015 and will be available to all pensioners who reach State Pension age before the introduction of the single tier pension in April 2016.
Class 3A will give pensioners an option to top up their pension in a way that will protect them from inflation and offer protection to surviving spouses. In particular, it could help women, and those who have been self-employed, who tend to have low Additional Pension entitlement.
www.gov.uk/government/publications/additional-state-pension-top-up
4 BUSINESS TAX
4.1 FATCA and regulations for the Crown Dependencies and Gibraltar IGAs
The UK and the Isle of Man signed an Intergovernmental Agreement (IGA) (the 'UK-Isle of Man Agreement to Improve International Tax Compliance') on 10 October 2013. This was the first agreement of this type to be signed and published where neither party was the USA.
Guernsey and Jersey signed IGAs with the UK on 22 October 2013 - the 'UK-Guernsey Agreement to Improve International Tax Compliance' and the 'UK-Jersey Agreement to Improve International Tax Compliance'.
The British Overseas Territory of Gibraltar signed an IGA with the UK on 21 November 2013 - the 'UK-Gibraltar Agreement to Improve International Tax Compliance'.
These four agreements are reciprocal, meaning that UK Financial Institutions will have to provide data on financial accounts held by residents of these territories. The UK will be bringing in regulations to implement these arrangements in 2014; these regulations were published in draft on 12 December 2013 along with a draft Tax Information and Impact Note, and are open for consultation until 24 January 2014.
Selected areas of draft guidance have already been published to give clarity on key differences in scope between the regulations for reporting on US account holders, and account holders from the Isle of Man, Guernsey, Jersey or Gibraltar. Further guidance relating to issues specific to these Agreements will be published shortly.
www.hmrc.gov.uk/fatca/gib-draft-regs.pdf
www.hmrc.gov.uk/fatca/gib-draft-tiin.pdf
www.hmrc.gov.uk/fatca/int-tax-comp-regs-2013.pdf
4.2 US FATCA
The IRS has issued further guidance to foreign financial institutions (FFIs) entering into an FFI agreement with the Internal Revenue Service (IRS) or reporting as a model 2 reporting FFI.
www.irs.gov/pub/irs-drop/rp-14-10.pdf
4.3 SDLT on de-enveloping transactions
HMRC has issued a note clarifying its August 2007 comments on the SDLT implications of de-enveloping property by distribution in specie. The note indicates there are two circumstances where HMRC considers that no consideration is given for SDLT purposes in a capital distribution de-enveloping transaction. The first is where there company is debt free and the shareholder gives no consideration for receiving the property distribution. The second is where there is debt but it is owed solely to the shareholder.
However, where there is a third party (non-shareholder) loan secured on the property when the company is liquidated, the transfer of the property by the company on a distribution will attract SDLT under paragraphs 1 and 8 of Schedule 4 FA 2003 where there is an assumption by the shareholder(s) of liability for the debt.
There may be situations where a company had a third party debt that has been repaid as a result of shareholder action (either through the subscription for more issued share capital or by replacing the third party debt with shareholder debt), prior to its liquidation. In such cases it is possible that on distribution of the property there will be no charge to SDLT as it will be a distribution in similar circumstances to the first two situations outlined above.
HMRC's note also includes extracts from and comments on the the Project Blue First-tier Tribunal case concerning the application of anti-avoidance legislation in FA03 s75A as follows:
There is some judicial guidance that may assist the correct application of section 75A in the decision of the First-tier Tribunal (Tax) in the appeal of Project Blue Limited v The Commissioners of HM Revenue & Customs released on 5 July 2013 [TC/2011/08390].
For example, the decision (at paragraph 227) confirms that section 75A applies regardless of the purposes or motives of the parties:
"Whilst it is clear that the purpose of section 75A is to counteract the avoidance of SDLT, the provision contains no requirement that the taxpayer should have a tax avoidance motive or purpose as a precondition or defence to the application of the provision...Parliament obviously intended that the provision should apply regardless of motive".
The Tribunal emphasised that each of the subparagraphs (a) to (c) of section 75A(1) should be construed in the context of the other subparagraphs, rather than as self-standing tests (see paragraph 238 of the decision). In a straightforward de-enveloping situation, the company should be 'V' and the shareholder(s) 'P'.
As to whether in that case transactions are 'involved in connections with the disposal and acquisition', the Tribunal states amongst other things (paragraph 250 of the decision):
"The word "involved" denotes some form of participation (ie involvement). Thus, a transaction which is part of a series of transactions will not be "involved" with other transactions simply because it is part of a series or sequence of successive conveyancing transactions. The linkage must be more than merely being a party in a chain of transactions and the test must be more than a "but for" test (or, as the classicists would put it, a sine qua non test) otherwise the word "involved" would be deprived of significant meaning."
www.hmrc.gov.uk/so/stamps-de-enveloping.htm
4.4 Extrapolation of partnership profits based on extra receipts
In the case of Mr Hugh Newell & Mrs Icilda Newell t/a Tanya's Takeaway, the First-tier Tribunal accepted the taxpayers' demonstration that extra receipts which HMRC contended were undeclared profits of a take-away food business were in fact receipts from active gambling.
This resulted in the cancellation of extra tax on profits and associated penalties for the years 2006/07 to 2010/11 totalling nearly £130,000.
www.bailii.org/uk/cases/UKFTT/TC/2013/TC03120.html
4.5 Guidance on the taxation of regulatory capital securities
HMRC has issued a technical note on the tax treatment of financial institutions' regulatory capital instruments (SI 2013/3209, which came into force on 1 January 2014). It replaces the previous technical note dated 16 July 2013 and takes into account consultation responses.
www.hmrc.gov.uk/drafts/reg-cap-technote.pdf
www.legislation.gov.uk/uksi/2013/3209/pdfs/uksi_20133209_en.pdf
4.6 Real estate investment trusts
HMRC has issued draft regulations (for comment by 17 January 2014) adding to the list of items to be taken into account in calculating the costs of debt finance under the real estate investment trust regime.
In addition to adding UK REITS and their overseas equivalents to the category of institutional investor, the draft regulations provide that amounts in relation to hedging risks of borrowing are included in the list of items to be taken into account in calculating the costs of debt finance for the purposes of determining property financing costs in the profit financing-cost ratio.
www.hmrc.gov.uk/drafts/reits-draft-si.pdf
4.7 Investment Manager Exemption expanding 'white list'
HMRC has issued a Tax Information and Impact Note proposing to expand the lists of 'investment transactions' that will not subject a fund to UK corporation tax (the white list), for two purposes:
- firstly to identify activities that may qualify for the Investment Manager Exemption; and
- secondly to specify that, subject to the existing conditions in the relevant regulations, certain transactions ("investment transactions") are not treated as trading transactions for UK tax purposes.
www.gov.uk/government/uploads/system/uploads/attachment_data/file/268302/ime-ci-tiin.pdf
4.8 CFC financing arrangements and application of section 441 CTA 2009
HMRC has issued guidance on its attitude to non-statutory clearance applications in respect of controlled foreign company (CFC) financing arrangements and the potential application of the loan relationship unallowable purpose rule. Extracts from the note include:
HMRC are prepared to consider a non-statutory application for clearance that a claim would be accepted in the case of both proposed transactions and existing arrangements. Clearance applications in respect of proposed transactions will only be considered in cases where the planning is essentially complete, but for the issue of uncertainty identified in the clearance application.
However, the structure of particular financing arrangements may also give rise to uncertainty in relation to other anti-avoidance rules, in particular the loan relationships "unallowable purpose" rule (section 441 CTA 2009, 'section 441'). This uncertainty may arise in respect of arrangements where a claim under Chapter 9 of Part 9A TIOPA is being considered.
It could also arise in other financing arrangements involving loan relationship debit where there is unlikely to be a CFC charge, but where a hypothetical financing structure that would be subject to a CFC charge on 25% or less of the CFC's profits (on the basis that a successful Chapter 9 claim for partial exemption would be made) may be considered to be an appropriate comparator for determining whether the actual arrangements had a purpose of securing a tax advantage as defined in section 1139 CTA 2010.
This uncertainty is most likely to manifest itself in cases where profits from an existing loan made by a UK company (a UK loan receivable) are effectively transferred out of the UK into a CFC or are sheltered in a financing arrangement for which a structure involving a CFC is proposed as a potential comparator for establishing a tax advantage......
....[CTA09] section 441 is a fact based test that can only be applied by examining evidence of purpose in each case and it is not possible to provide generic guidance about how section 441 may apply to a given financing structure. The presence of a CFC (including one for which a successful Chapter 9 claim has been made) does not in itself indicate that any company had a tax purpose in establishing the structure. Whether a company had a tax avoidance purpose, and whether that purpose was a main purpose, will depend on the evidence relating to the company's purpose in respect of the loan relationship.....
HMRC does not provide non-statutory clearances in relation to section 441 (see CFM38200).
If a business is concerned that section 441 may apply to a financing structure they have already implemented, then they should discuss the transaction with their customer relationship manager or customer co-ordinator......
However, if HMRC is required to consider the purpose of the arrangement in the course of giving a clearance about the application of other tax rules, such as the arbitrage legislation in Part 6 of TIOPA 2010, it will also advise whether or not, based on the information provided, there is a low risk it would investigate the transaction to establish whether section 441 applies.
www.hmrc.gov.uk/drafts/guidance-s441-cfc-financing.pdf
5 VAT
5.1 Definition of 'special investment fund' for VAT exemption purposes
The Advocate General (AG) in the ATP case (C-464/12) concluded that under certain conditions occupational pension funds can be sufficiently akin to collective investment schemes to qualify as 'special investment funds'. Relevant criteria include the pooling of funds for several investors, the spreading of risk over a range of securities and whether the beneficiaries bear both the costs of the fund and the investment risk. Whether these criteria are met though needs to be determined by the national courts.
The AG considered that the main Court had sufficient guidance from existing case law to determine the answers to other points raised at the hearing concerning the meaning of 'management' services and the application of the exemption provisions.
5.2 Photobooks whether supply of goods or services
The First-tier Tribunal considered an appeal against HMRC's assessments to the effect that the supplies made by Magic Memories (UK) Limited (MMUK) in respect of photo- books at various tourist visitor attractions are standard-rated instead of zero rated for VAT purposes.
MMUK sells photo-books to visitors at least eight tourist attractions in the UK including London Zoo, Edinburgh Castle, Chester Zoo, Deep Sea World and The Wheel of Liverpool. Visitors to the attractions are photographed on entry and during their visit (without obligation) and offered the opportunity to buy a photobook usually for around £15 on exiting the attraction.
Item 1 of group 3 of VATA Sch8 specifies that sales of books, booklets, brochures, pamphlets and leaflets are zero rated. HMRC contended that the production of the 'booklets' was either photographic services (standard rated) or photographs (also standard rated).
The Tribunal concluded that both these views were wrong, distinguishing MMUK's circumstances from those of a wedding photographer in the case of Risbey's Photography Ltd v HMRC, Digital Albums Ltd v HMRC (2008) VAT Decision 20783, as in MMUK's case, they had not been invited by the customers to take the photos and had operated on an entirely speculative basis. The finished product (the photo-book, complete with photographs) was presented to the visitor as an item which the visitor could buy or not as the case may be.
In the view of the Tribunal the photo-books fell within the meaning of the word "booklet." The photo-books were thin or small books. They contained relatively few pages (five leaves, for example, in the case of London Zoo) and, therefore, seemed to us to be "booklets" (small books) rather than "books". Their covers (at least the front covers) were, in the Tribunal's view, marginally more substantial than the internal pages, although the difference was very slight. The rear covers seemed more substantial. Their content was such that they were clearly intended to be read and their pictures (not just the photographs of the visitors, but the illustrations in the photo-book) looked at. Their purpose was not simply to hold the photographs of the visitors.
The FTT concluded zero rating should apply.
www.bailii.org/uk/cases/UKFTT/TC/2013/TC03107.html
5.3 Single & multiple supplies concerning retirement accommodation
Companies in the McCarthy & Stone (Developments) Limited (MSD) VAT group built and sold retirement accommodation. They would build a set of separate apartments with communal areas such as a residents' lounge. They would furnish the communal areas. They granted new leases of the apartments to purchasers. By the leases they gave the purchasers the right to use the communal areas. Under the contract of sale a purchaser of an apartment paid a premium for his or her lease together with a sum of £500 (or £1000) "towards the communal fittings" and under the lease agreed to pay rent and an annual service charge.
The issue on this appeal was whether MSD could get credit for input VAT on its purchase of the furnishings for the communal areas. If MSD made a single zero rated supply it would be entitled to credit that VAT. The appeal related to supplies made by MSD in the quarters ending January 1980 ("01/80") to 04/97, and 01/06 to 03/09.
HMRC contended that the extra price paid for the furniture did not fall within the zero rating applicable to the first grant of a major interest in a residential building, but was an exempt supply relating to land (the right to use furniture in the communal areas) on the basis of the Talacre Beach Caravans case (Beach Caravans Ltd v Customs & Excise Commissioners C-251/05 [2006] STC 1671).
The First-tier Tribunal concluded that the premium payable by the purchaser of an apartment was a single supply (using the principles established in the Card Protection Plan case) that included the ancillary amount payable for the furniture and that the Talacre Beach Caravans principle could not be applied to identify the supply of the right to the communal areas as a separate supply for VAT purposes.
www.bailii.org/uk/cases/UKFTT/TC/2013/TC03104.html
5.4 Intrastat changes from 1 Jan 2014
HMRC Brief 38/13 contains notes on changes to Intrastat thresholds from 1 January 2014:
- the exemption threshold for arrivals is increased from £600,000 to £1,200,000;
- the Delivery Terms threshold is increased from £16 million to £24 million;
- the exemption threshold for dispatches (EU exports) remains unchanged at £250,000.
www.hmrc.gov.uk/briefs/vat/brief3813.htm
5.5 VAT treatment of refunds by manufacturers
HMRC has issued a document setting out responses to its consultation on ensuring that refunds provided to customers by either retailers or manufacturers are dealt with consistently for VAT purposes.
A draft statutory instrument has been published to add new regulation 38ZA (in SI 1995/2518), extending the references in regulation 38(2) in specified circumstances to require both the first supplier in a chain of taxable supplies relating to the same goods (typically a manufacturer or wholesale importer) and a final consumer at the end of that chain who is a taxable person (typically the recipient of a supply from a retailer) to adjust their VAT accounts where the consideration for the final supply in the chain has decreased as a result of the first supplier having made a relevant payment as defined.
Once approved it will become effective from 1 April 2014.
www.hmrc.gov.uk/drafts/draft-si-emvat-reg14.pdf
5.6 Consultation on filing of VAT returns
On 30 September 2013, the First-tier Tribunal released its decision in joined appeals lodged against the requirement to file VAT returns online by a number of VAT registered businesses (ref: TC 02910t: L.H. Bishop Electrical Co. Ltd. A F Sheldon t/a Aztec Distributors).
The Tribunal judge held that the failure of the VAT Regulations 1995 to take account of a person's ability to comply on account of:
- age;
- disability;
- computer illiteracy (linked to age); or
- remoteness of location,
was a breach of the European Convention on Human Rights (ECHR).
The judge also held that the Filing by Telephone service (see paragraphs 2.6 and 2.7 above) was an unlawful concession that had not been properly published and that the availability of this service to appropriate businesses could therefore not heal the aforementioned human rights breach.
HMRC has therefore issued a consultation (for comment by 14 February 2014) proposing to:
- Review the VAT Regulations 1995 to ensure beyond doubt that they provide a means for all VAT registered businesses (except the very small number that are exempt) to file VAT returns by approved electronic means.
- Publish guidance, setting out:
- what VAT registered businesses should do if they are having difficulty filing VAT returns online;
- the circumstances in which HMRC will consider allowing businesses to use the Filing by Telephone service and the process to be followed by businesses who consider that they need to file by telephone.
- Consider changes to the Filing by Telephone service to ensure that it meets the needs of businesses that are unable to file returns online using the current approved forms of electronic return system without the assistance of others.
5.7 VAT status of golf club fees for visiting non-members
The Court of Justice of the European Union (CJEU) has held that UK VAT law in respect of VAT exemption for fees for services closely linked with sport of physical education provided by an eligible body operating a membership scheme, is incorrect. UK law currently does not permit such fees to be exempt unless provided to a member of the eligible body (VATA Sch9 group 10 item 3 as clarified by note 2 to that group).
The CJEU concluded:
Given that access to a course is necessary in order to play golf, the supply consisting in the grant of the right to use a golf course is closely linked to sport within the meaning of Article 132(1)(m) of Directive 2006/112, regardless of whether the person concerned plays golf on a regular or organised basis or in order to participate in sports competitions.
It follows that if that supply is provided by a non-profit-making body, it is covered by the exemption from VAT provided for in Article 132(1)(m), it being immaterial whether it is provided to a member of the body or to a visiting non-member......
The UK Court contended that green fees from visiting non-members represented additional income and that the text of the VAT directive permitted an exclusion from exemption for this additional income. The CJEU responded:
Accordingly, the term 'additional income' ..... cannot be construed in such a way as to lead to a restriction of the scope of the exemption .... on the basis of the status of the recipients of the supply in question as members or non-members, a criterion that was deliberately excluded when the exemption was defined.
The CJEU also concluded it was not possible for the UK to exclude the visiting non- member green fees from exemption on the grounds of distortion of competition. This decision should enable non-profit making membership golf clubs to claim refunds for output VAT levied on visiting non-member green fees in appropriate circumstances.
We have taken care to ensure the accuracy of this publication, which is based on material in the public domain at the time of issue. However, the publication is written in general terms for information purposes only and in no way constitutes specific advice. You are strongly recommended to seek specific advice before taking any action in relation to the matters referred to in this publication. No responsibility can be taken for any errors contained in the publication or for any loss arising from action taken or refrained from on the basis of this publication or its contents. © Smith & Williamson Holdings Limited 2014
