VAT – Exemption – Supply of interest in land – Golf club having use of golf course under licence agreement with appellants – Whether appellants making standard-rated supply of services or exempt supply of interest in land – Item 1 of Group 1 of Schedule 9 to Value Added Tax Act 1994 – Appeal dismissed
The appellants traded in partnership as a golf course. Their income derived from three main sources, namely: (i) green fees paid by casual visitors to the golf course; (ii) bar and restaurant receipts; and (iii) facility fees paid to them by a golf club, which was a separate, unincorporated members club that used the course pursuant to the terms of a licence agreement. Under the agreement, the appellants had the right to set the joining and membership fees of the club, which were levied on members annually and remitted by the club to the appellants. The appellants offered clubhouse facilities to members in the bar and restaurant, provided reception duties and controlled tee times. Golf club members with a “seven-day membership” were had priority use of the course on weekend mornings, at which times they reserved most of the available slots; they could also play during the week, subject to availability.
The appellants charged and returned VAT on the green fees and on bar and restaurant receipts, but not on the facility fees. In October 2007 and January 2008, VAT assessments were raised against them representing VAT arrears from 2004 to 2007 in respect of the facility fees, on the ground that the supplies made by the appellants under the licence agreement were standard-rated supplies of services. The appellants appealed, contending that they were exempt supplies consisting of the grant of an interest in land within Item 1 of Group 1 of Schedule 9 to the Value Added Tax Act 1994. They claimed that although the licence agreement was expressly stated not to confer exclusive possession, the club, by virtue of its control over who could enter onto the course on Saturday mornings, did have exclusive possession and control of the golf course during those times sufficient to fall within the exemption in Item 1,
Held: The appeal was dismissed.
Although the title ascribed to a document by the draftsman did not determine its nature, and it was necessary to look at the economic purpose of the relationship between the parties rather than the wording of the licence agreement alone, it had clearly been the initial intention of the parties for exclusive possession to be denied to the club. The language of the agreement confirmed that intent. Having regard to all the circumstances in which the supply took place to determine its characteristic features, the club and its members were paying the facility fees to play golf and not to occupy the course. That was what members expected in return for the membership fee and that was the economic purpose of the arrangements between the parties. The membership fee entitled members to much more than the use of the course at weekends. The appellants provided golfing facilities, encompassing all that that entailed, which amounted to more than the passive provision of the land. The fact that those facilities were made available on a preferential basis on certain limited occasions was not sufficient to constitute occupation. What the club and its members paid for was a general right to use the golf course, rather than occupy it, with a priority right to use it on Saturday and Sunday mornings and on tournament or event days. Occupation of the golf course was not a prerequisite to giving economic effect to the licence agreement, and a lease or let was neither achieved nor necessary on the facts of the case. The club did not have an “interest” in the golf course in normal land law terms but had instead a collection of priority rights. The Item 1 exemption was not made out: Sweden v Stockholm Lindopark AB C150/99 [2001] STC 103 applied.
Hui Ling McCarthy (instructed by Vantis) appeared for the appellants; Joshua Shields (instructed by the legal department of HM Revenue & Customs) appeared for the respondents.
Sally Dobson, barrister
