If your club hires its pitches or training facilities from third parties such as local authorities, schools and clubs, it will welcome the recent change in policy announced by HMRC following the Goals Soccer Centres PLC decision.
Most Charter Standard clubs operating at grassroots level will not be VAT registered. If a club which is not VAT registered hires pitches on which VAT is charged by the supplier then, in practice, this is an additional cost to the club. It is therefore in the interests of those clubs for supplies to be made on a VAT exempt basis so that the cost is reduced.
The case concerned the VAT treatment of hire charges relating to the supply of five-a-side football pitches by Goals Soccer Centres PLC (Goals). Goals organised and administered competitive football leagues and competitions and charged the teams that participated. The business took the view that, for VAT purposes, this charge was for an exempt supply of land (the pitch). HMRC contended that the charge was for a standard-rated supply of the right to participate in an organised football league.
The case was referred to First Tier Tribunal which found that there were two separate supplies being made:
- a supply of land (the pitches) which was exempt from VAT as the relevant conditions were met; and
- a supply of administration and management services which was standard rated (so VAT at 20% standard rate would apply).
HMRC accepts that the decision of the FTT is applicable to all traders who operate in circumstances akin to Goals. This includes traders who hire the pitches from third parties such as local authorities, schools and clubs. However, exemption will only apply where there is a series of lets in accordance with specified conditions (for reference, these can be found in Note 16, Group 1, para 1 (m), Schedule 9 of the VAT Act 1994).
The conditions which apply to pitch hire require there to be a series of lets covering 10 or more periods where:
- Each period is in respect of the same activity carried on at the same place
- The interval between each period is not less than one day and not more than 14 days
- Consideration is payable by reference to the whole series and is evidenced by written agreement
- The grantee (e.g. the hiring club) has exclusive use of the facilities
- The grantee is a school, a club, an association or an organisation representing affiliated clubs or constituent associations
Where a single price is charged to the customer, businesses will need to determine the value of the two different supplies to establish the correct amount of VAT due. Whatever method is adopted to do this, there must be sufficient documentary evidence kept to show how a business has arrived at a fair and reasonable apportionment.
HMRC’s commentary on the policy decision arising from the Goals case can be found here:
The specific conditions of exemption in Schedule 9 of the VAT Act 1994 can be found here:
For more information, help or advice please contact John Devine on 0191 211 7905.