UK: VAT: Supplies To Club Members And Non-Members Are Not Taxable

Last Updated: 28 January 2014
Article by Michael Cant

Summary and implications

The European Court (CJEU) has ruled in the case of Bridport and West Dorset Golf Club (C-495/12) that green fees paid by non-members are VAT-exempt.

This ruling means:

  • UK legislation is unlawful as it requires fees paid by non-members to non-profit-making sports clubs to be standard rated;
  • HMRC could face significant repayments of tax as there are over 400 related cases ongoing brought by UK golf clubs; and
  • there could be similar claims for repayment made by other types of non-profit-making sports clubs.

Factual background

Bridport is a non-profit-making golf club. Nearly 20 per cent of its income comes from "green fees" charged to non-members for access to the course. Non-members are charged VAT on the green fees they pay whereas members are not charged VAT on their annual membership fee.

Bridport had accounted to HMRC for the VAT collected on the green fees but sought to recover this tax, of approximately £140,000, on the basis that UK law was incompatible with EU law and such green fees were exempt from VAT.

HMRC refused the claim. The club successfully appealed to the First-tier Tribunal but HMRC appealed to the Upper Tribunal, who sought clarification of the EU law from the CJEU.

The CJEU has now published their ruling on the clarification sought and the Upper Tribunal must take this into account when making their final ruling.

Legal background

Currently, UK law provides that supplies that are closely linked to sports or physical education made by non-profit-making organisations to members (where the organisation operates a membership scheme) are exempt from VAT. Supplies made to non-members are taxable at standard rate.

EU law allows for supplies that are closely linked to sports or physical education made by non-profit-making organisations to be exempt from VAT but, unlike UK domestic law, it does not distinguish between members and non-members. Such a distinction was envisaged in the original proposal for the EU legislation but was not included in the final legislation. However, there are several conditions to the exemption provided by EU law, in particular, the:

a) exemption does not apply where the supply is made in order to obtain "additional income" for the non-profit-making organisation; and

b) exemption must not be likely to cause distortion of competition to the disadvantage of commercial enterprises who are subject to VAT.

The clarification sought from the CJEU was whether the UK's legislation, which distinguishes between members and non-members, was justified on the grounds of one of these conditions to the exemption.

CJEU ruling

"Additional income"

HMRC's main argument was that the VAT exemption does not apply to non-members as the fees from non-members are "additional income".

It is "immaterial whether it is provided to a member of the [golf club] or to a visiting non-member"

The CJEU disagreed with HMRC. It considered that the "core" supply by the golf club is providing sporting facilities and that "additional income" would only come from supplies unrelated to their core supply. Further, EU law does not require the sport to be practised in a particular way, for example in a regular manner, i.e. as a member. The supply to both members and non-members is the same and it is "immaterial whether it is provided to a member of the [golf club] or to a visiting non-member". Therefore whether income is "additional" or not cannot depend on the status of the recipient of the supply. Thus members and non-members are to be treated equally.

Distorting competition

HMRC argued that requiring non-members to pay VAT avoids the distortion of competition as it, in effect, puts non-profit-making organisations and commercial organisations on an equal footing with respect to non-members.

The CJEU dismissed this argument, commenting that the UK's legislation is not limited to preventing distortion of competition in the way the exemption is implemented, but changes the scope of the exemption itself. The court ruled that restriction on distortion of competition did not give authority for the UK to discriminate between members and non-members. HMRC's argument could equally apply to the effect on competition of the VAT exemption for members, which is allowed in UK law, and such reasoning would call into question the very existence of the exemption itself.

The CJEU concluded that UK law is incompatible with EU law as it restricts the exemption available in law to the members of clubs. The UK did not have the authority to narrow the scope of the exemption by reference to the status of the recipient, i.e. whether they are a member or not. Therefore all supplies of the facility to play golf provided by non-profit-making clubs must be exempt.


The case now returns to the Upper Tribunal for a final ruling based on the CJEU's ruling. HMRC could face significant repayments of tax as there are over 400 related cases brought by UK golf clubs. However, HMRC is likely to argue a defence of unjust enrichment (that the non-members and not the club bore the burden of the wrongly charged VAT and so the club should not benefit from a repayment) and so the clubs will need to be able to identify the non-members who paid VAT on their green fees.

This decision was much anticipated following the earlier decision of Canterbury Hockey Club. It is likely that repayment claims, although initially limited to golf clubs, will be made by a wide cross-section of non-proprietary sporting clubs.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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