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Stoke-by-Nayland golf club wins legal battle in VAT exemption case after favourable ruling from Upper Tribunal




Golf course. (5135208)
Golf course. (5135208)

A golf club in Suffolk has triumphed in a protracted legal battle, after a tribunal upheld an earlier ruling that it was eligible for tax exemption.

The Upper Tribunal ruled in favour of Stoke-by-Nayland Golf and Leisure, after an appeal by Her Majesty’s Revenue and Custom (HMRC), which had previously claimed it had seen evidence of a “long-standing tax avoidance scheme”.

However, the judgement ruled that the company was exempt from paying VAT on its playing fees, because it qualifies as a non-profit making body.

Under tax law, certain sporting bodies are not liable for VAT if they are not subject to commercial influence, and if they only use profits for the maintenance of sports and recreation facilities.

However, the golf club had been pulled into a legal fight when HMRC opened an investigation following a site visit back in March 2011, from which it eventually ruled the company was liable for back taxes between January 2009 and September 2013.

The club appealed this to the First Tier Tribunal (FTT), which ultimately ruled in April 2017 that the company was a “non-profit making body, not subject to commercial influence”.

HMRC then made its own appeal to the Upper Tribunal, but this panel has now upheld the FTT’s ruling.

The legal case centred around the relationship between Stoke-by-Nayland Golf and Leisure, which runs the golf club, and Stoke by Nayland Club Ltd, a separate company that owns the club building and land.

Stoke by Nayland Club, a subsidiary of The Boxford Group, wholly owned and managed the club until 1996, when the leisure business was established to separate the golf course from the rest of the businesses in the commercial group.

Giving evidence in the case, Susanna Rendall, the managing director of The Boxford Group, stated this was done because running the golf club had been “emotionally draining” and taken a disproportionate amount of time.

“It was like having a thousand green-keepers on site,” she said. “Every second, a member would have either a complaint or a suggestion. It was just impossible to get on with any other work.

“I didn’t want to destroy the membership.

“The membership needed to be looked after, and nurtured and taken forward, so they could enjoy playing golf on those courses.”

The two companies are run by separate boards, with the golf club operating the golf course and paying an annual license fee to Stoke by Nayland Club, which continued to receive playing fees, which were subject to the usual rate of VAT.

In 2009, citing pressure on revenue due to a decline in memberships, an agreement was reached over a higher license fee, in return for the playing fees being transferred.

But HMRC claimed that the golf and leisure business was set up to exploit the VAT sporting exemption, and argued that the two companies are actually a single commercial entity.

However, the FTT ruled the companies operate “on a fair and reasonable arm’s length basis”, and the VAT exemption was valid.



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