New development in green fees VAT claim saga

Non-profit making sports clubs claiming back VAT from HMRC following the Bridport & West Dorset Golf Club ruling may initially only receive a partial credit or repayment – and only if they meet certain conditions.

Affected organisations are non-profit making sports clubs that charged VAT on supplies to individuals who were non-members, when HMRC now accepts these supplies should have been exempt. HMRC has previously stated (in VAT Information Sheet 01/15) that claimants must undertake to reimburse their customers who bore the burden of the tax. They should also adjust their VAT claims to take into account the effect on their input tax recovery and Capital Goods Scheme position.

Since then HMRC has been considering whether clubs would be unjustly enriched if claims were refunded in full. It has now concluded that this is the case – some clubs would be enriched by 50% and others by 67%. As a result, although the question of unjust enrichment is still to be finally decided by the courts, HMRC has decided to pay or credit (subject to certain conditions) 50% or 33% of the value of valid claims ahead of any court decision. The percentage depends on green fees charged per person for a round of golf. Where the fee exceeds £100 at any time of year, HMRC will repay or credit 33% of the claim. Where green fees are less than £100, it will repay or credit 50%. HMRC considers the level of green fees to be representative of a club’s ability to pass the VAT cost on to its customers.

Sports clubs seeking to claim back VAT are now required to complete the following steps:
  1. Notify HMRC that their claim has been checked and, where necessary, adjusted in line with Information Sheet 01/15;
  2. Confirm whether green fees are less or more than £100 per person per round;
  3. Confirm whether an interim payment or account credit is preferred.
Where a claim has not been checked or adjusted, HMRC will not consider the claim until the courts issue their final decision on unjust enrichment. HMRC has also clarified that if a club does not pass on to the affected customers the repaid or credited amounts of output tax, there may be direct tax implications.

It is important that clubs check the accuracy of their claims. HMRC has warned that, where clubs have not taken due care in submitting valid claims, they may be charged a penalty in relation to accounting periods starting on or after 1 April 2008, where the return due date is 1 April 2009 or later.

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