HMRC scores own goal in football pitch VAT debate

The VAT rules concerning sports facilities are complex. Over the years an array of disputes have arisen between providers and HMRC over eligibility for exemptions related to both sport and the facilities it is played on.

A recent case from the First-tier Tax Tribunal (FTT) has brought one of these issues back to the surface. This latest appeal concerns Netbusters, which organises competitive football and netball leagues, and supplies pitches and courts for those matches to be played on. Netbusters hires pitches and courts from schools and local authorities for set periods of time, then hires them on to its customers, usually for a block booking of a 10 match ‘season’. Teams wishing to participate in its leagues pay a single fee to cover both the pitch hire and Netbusters’ league management services, which include organising fixtures, recording results and providing a referee and matchball for each game.

Back in 2014, HMRC accepted, after losing an appeal brought by Goals Soccer Centre, that the pitch hire element of a combined supply of pitch hire and league management could be exempt from VAT, provided it met strict conditions on duration and frequency of lets. However, HMRC regarded the league organisation element of the service as subject to VAT and required businesses to determine the value of the two different supplies to calculate the correct amount of VAT due.

Netbusters has now taken this argument a step further. It formed the view that the fees it charged to the teams participating in its leagues was a wholly exempt supply of land and submitted various claims and appeals to HMRC to recover VAT it believed it had overpaid. HMRC disagreed, deciding that the whole supply was subject to VAT at 20 per cent. The total VAT in dispute over a seven-year period added up to of £818,000.

The First-tier Tax Tribunal has now decided the case in favour of Netbusters, finding that its supply to its customers was exempt from VAT.

What does this mean for other providers of sports and facilities?

Most providers of similar services will have based their VAT accounting on HMRC’s current policy that, while the pitch hire element is exempt from VAT, they must account for VAT on the value of their league management services only. This is now contradicted by the Netbusters decision, which found that a single supply of pitch hire has taken place, so the whole charge is exempt. There may be an opportunity to treat their league management fees as exempt as well as the pitch hire element and submit a claim for VAT that may have been overpaid in the last four years.

However, there are a few reasons why businesses should be cautious when considering whether to make a claim based on Netbusters. First, the land exemption used in this case is subject to strict conditions concerning the duration, frequency of lets, how the facility is used and how charges are made. Providers must first be sure they meet these legal criteria for exemption. Second, HMRC may well decide to appeal the FTT’s decision to the Upper Tribunal. In addition to the main point on whether a single supply had been made, there are further legal points that were not fully considered at the FTT, such as whether the teams who hired the pitches were an eligible recipient for the land exemption. Finally, exemption will not always be advantageous for providers, especially if they own their own facilities and have incurred considerable capital expenditure on them. An increase in the level of exempt supplies could reduce eligibility to recover VAT paid on maintenance, upgrades and overheads.

Providers of similar sports leagues and facilities should review their position and watch for news of further developments in this case.