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Sam, Accountant
Category: Tax
Satisfied Customers: 14153
Experience:  26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
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I am Chairman of a Crown Green Bowling Club with bowling members

Customer Question

I am Chairman of a Crown Green Bowling Club with bowling members and many social members. In May 2014 the VAT inspector has decreed that we should pay VAT on ALL Subscriptions and has gone back to 2011 at a total back tax payment of £4,700 approximately. We have paid this but certain members maintain that we should not be liable for this and should reclaim it. Could you help please (I have used you previously and been very satisfied)?
Submitted: 2 years ago.
Category: Tax
Expert:  Sam replied 2 years ago.
Thanks for your question - I am Sam and I am one of the UK tax experts here on Just Answer.
Unless you can substantiate that the bowling green operates on a not for profit basis - then I am afraid all membership fees are subject to standard rate VAT.
To define not for profit - not for profit, appropriate clauses in constitution, surpluses reinvested in club and no commercial influence
Booklet 701/45 covers organisations such as yours but the law did change in 2000 to lessen the amount of organisations that remained exempt (hence why the VAT at HMRC have only gone back to 2011 with your position)
But I have added a link here which looks at what has to be in place to allow an exemption still to apply, in all its full detail
But to assist with this
be non-profit-making; which means all profits are ploughed back into the club
have in its constitution restrictions on the distribution of profits; and furthermore details that all profits are put back into the club
not be subject to either commercial influence or part of a wider commercial undertaking
This also makes sure that the commercial influence test is met - so if, within the 3 years preceding the relevant sports supply, you:
(a) paid a salary or bonus calculated by reference to profits or gross income to anyone who was an officer or a shadow officer of the club; or was connected with such an officer or
(b) purchased certain goods or services (called ‘relevant supplies’) from anyone, who was:
an officer or shadow officer of the club
acting as an intermediary between the club and the officer
or connected with any such person
Then it will be treated as a having commercial influence and fail to ability to be treated as VAT exempt.
I think you have nothing to lose to look at each of the requirements set out for an exemption for VAT to apply AND consider building a case to appeal HMRCs decision armed with all the facts - and furthermore if they then remain in dispute - ask them to detail under what points do you fail to remain considered as a exemption supply. (which you should have been advised on when HMRC had concluded their review so perhaps have a look at this)
But it may well be that the changes in 2000 - are the reason why you no longer fall under the remit of exemption - which at least gives you a solid case to quell the thoughts with those members that still hold concerns !
It might even be prudent to as a local accountant who is familiar with VAT and clubs to look at this closely for you - could be money well spent if HMRC have made a mistake.
Let me know if I can assist with any further information
Customer: replied 2 years ago.

Hi Sam Thanks for your prompt reply. As we make profits and losses I assume we are a profit making organisation. However those profits are not distributed in any way and any surpluses are retained in the Club. We do pay fees to officials and to our secretary/book-keeper who produces the final accounts and small gratuities to committee members.

Are we not a non profit organisation?

REgards ***** *****on

Expert:  Sam replied 2 years ago.
Hi Joe
Thanks for your response (apologies for my delay - I've been with clients)
I would say that you are borderline - as whilst its acceptable that honorarium is paid to officials and the secretary and committee members, it depends what you mean by fees!
But the fact that all profits go back into the club - which I would assume are used to improve and maintain the club facilities is appropriate and that element meets the exemption.
It would also appear that you would not be considered as having commercial influence as such, so it comes down to the fact you pay fees (which could constitute emolument) - is the sticking point here which touches on the commercial remit and the non profit element.
But you would need the services of a local accountant who can look through how the club is run its income strands and the VAT element of activities and zero rated element and whether HMRC have applied the legislation correctly.
I am afraid we are only able to offer information and advise within that information, rather then offer one to one guidance and reviews.
But I would say - at face value - my general view is that there may be scope to challenge HMRC!
Let me know if I can be of any further assistance - but it would be appreciated if you could take the time out to rate (or click accept) the level of service I have provided.