Clubbing the taxman: Golf courses eye billion-pound VAT rebate as row with clubs leaves taxman in the rough

Oliver Gill
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There are around 1,300 member-owned clubs in the UK (Source: Getty)

Golf courses could enjoy a bumper billion-pound refund from the taxman, as a long-running battle over VAT payments escalates.

Not-for-profit golf clubs won a legal fight with tax authorities last year over VAT charged on green fees since 1994.

In 2013, European courts ruled 457 such UK member-owned clubs should be reimbursed £115m by HM Revenue & Customs (HMRC). Although subsequently challenged in UK tax courts, the ruling was upheld last year such that 90 per cent of the amount was due back to the clubs.

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With around 1,300 member-owned clubs in the UK, this means payouts could reach £300m if refunds are made at similar levels to all non-profit clubs.

An entirely separate ruling due to be heard in the Supreme Court this summer could then double refunds to over £600m.

Retailer Littlewoods has been locked in a long-running battle with HMRC, arguing that tax rebates owed to the company should include compound interest.

If Littlewoods is successful, experts say it could also result in bigger rebates for golf clubs. Because golfing VAT refunds stretch back over two decades, the precedent set would mean compound interest will increase repayments by up to 100 per cent.

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Former professional golfer Vivien Saunders believes member-owned clubs are in line for around £1bn, far more than the £600m estimate.

As head of the Association of Golf Course Owners (AGCO), Saunders represents some of Britain’s commercial clubs. She is unhappy that proprietary courses, which are run for profit, are not entitled to similar multi-million reimbursements.

At present, for-profit golf courses must continue to charge VAT at 20 per cent on fees. However, these commercially operated clubs are upping the pressure on HMRC and the Treasury to even up the playing field between them and their member-owned counterparts.

Legal experts representing both proprietary clubs and HMRC have locked horns on claims of inequity as part of an attempt to come to a behind-closed-doors agreement.

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City A.M. has obtained correspondence between a second representative body, the UK Golf Course Owners Association (UKGCOA), together with England Golf on the matter.

In the letters, HMRC claimed a reduction in the VAT rate to five per cent, one of the proposed solutions by proprietary club owners, would cost the taxpayer an eye-watering £15bn. However, in subsequent correspondence HMRC reduced its estimate of the hit to £1bn, with no further explanation as to how either amount was calculated.

UKGCOA refutes the estimates and has shared its own calculations. Made in conjunction with accountancy firm KPMG it puts the annual cost to the exchequer at £520m.

HMRC confirmed its estimate of £1bn to City A.M. but declined to provide an explanation of why it previously put the estimate at 15 times the figure.

Either way, in total, Britain’s member-owned and proprietary clubs could therefore be due a refund topping £1bn.

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Conservative MP for Lincoln Karl McCartney, who is the co-chairman of the all-party parliamentary golf group, urged the government “to move quickly on making decisions” on the VAT situation of both member-owned and proprietary golf clubs.

McCartney said: “It is vital that as a country we have a successful golf industry that provides jobs, contributes to economic growth and keeps the nation fit and healthy.

“Like any organisation, all golf clubs want is clarity and consistency in how VAT is applied. For not-for-profit clubs this is whether the VAT overpayments they receive should be based on compound or simple interest, while proprietary golf clubs just want a level VAT playing field.”

The UKGCOA appears to be taking a conciliatory approach to convincing the government to show some leeway to commercial golf clubs.

Nevertheless, UKGCOA said it “might” mount its own legal challenge if it senses no movement in the Treasury position in the next six to 12 months. “That is probably the next stop,” a spokesperson for UKGCOA said.

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Andrew Lloyd-Skinner, who leads VAT negotiations on behalf of UKGCOA, said: “While our strategy remains ... to exhaust all collaborative methods to resolve the VAT distortion issue for golf, we have been disappointed with the lack of collaboration by HMRC analysts.

“Having said this, HM Treasury officials have been open to dialogue and recently agreed to take our proposed options to minister Jane Ellison. Our Treasury contacts are waiting for further information from us before doing so and we are in communication with our advisers at KPMG to provide this information.”


What are UKGCOA and England Golf calling for?

To level the playing field between proprietary clubs and member-owned clubs it has proposed one of the two changes:

The rate of VAT is reduced to five per cent with a specific carve-out for golf. It says there is precedent for this in at least eight EU member states; or

An amendment of the 1999 Sports Order that would allow the creation of an OpCo/PropCo structure. The OpCo would be member-owned and therefore zero VAT charged but not run for profit. The PropCo would be profitable and charge OpCo rent for the course it owns.

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