News
Tax Case
Sporting exemption
News
Tax Case
Sporting exemption
The taxpayer company, a wholly owned subsidiary of ML Ltd, was a non-profit making body and thus exempt from VAT. In 1998, the taxpayer handled the sporting activities of various golf and country clubs, which had previously been managed by ML Ltd. Members' subscriptions were divided in two between the taxpayer and ML. Subscription payments were paid direct into ML's bank account, and only from September 2000 did ML pay any interest to the taxpayer. The taxpayer did not pay ML any rent for the use of land. Customs assessed the taxpayer to VAT from September 1998 to December 1999 and for two later periods. The taxpayer appealed.
The tribunal held that the taxpayer company had been created to obtain a fiscal advantage and that it had no independent business purpose. The terms on which ML used the taxpayer's money without initially paying interest showed that there had, in effect, been a distribution of profits. Thus, the taxpayer was not entitled to treat the supplies of sporting services that it made as exempt from VAT. The taxpayer company appealed.
In the High Court, Mr Justice Hart agreed with the tribunal. The taxpayer company was not a non-profit-making organisation for the purposes of Article 13(A)(1)(m) of the Sixth Directive or Group 10 of Schedule 9 to the VAT Act 1994.
The taxpayer's appeal was dismissed.
(Messenger Leisure Developments Ltd v Commissioners of Customs and Excise, Chancery Division, 21 July 2004.)