Cambridge University Boathouse

Cambridge University Boathouse – Application of sports exemption and who is the ‘true beneficiary’?

Kieran Smith, Director, VAT and Customs Duty Services
Cambridge University Boathouse

What is the issue?

The VAT Tribunal has recently decided that sports related services received by two clubs were actually enjoyed by the clubs themselves and not the individual members and so VAT at the standard rate was due on the income received. The case transcript is available here.

Cambridge University Boathouse argued that VAT applied to the license provided to the clubs as this enabled recovery of VAT incurred in relation to the construction of the Boathouse.  However, many schools provide sports related services to clubs and apply the sports exemption (VAT Act 1994, Schedule 10, Item 3) on the basis that the ‘true beneficiary’ is the individual playing the sport and not the club itself. Does this decision change this established treatment?

Should VAT be applied on sports facilities used by non-profit making clubs?

The answer is ‘no’. The Cambridge University Boathouse’s facts will differ from the usual arrangements whereby a third-party sports club uses a school’s sports facilities. In the judgement it was recognised that the members of the rowing clubs using the boathouse:

  1. had no right of access to the Boathouse other than at the invitation of the clubs;
  2. did not pay for the use of the Boathouse; and
  3. had no right to store equipment at the Boathouse.

This would not be the case where schools let facilities such as courts, pitches and gymnasiums, as the let will grant sufficient rights for the individual to enjoy their sport of choice in return for payment. Therefore, in most instances it will be clear that it is the individual and not the club that is the ‘true beneficiary’ and that the sports services VAT exemption applies.

Does the case itself represent an opportunity for VAT planning?

Again, the answer here is ‘no’ as a First Tier Tribunal the decision only binds the parties involved in the case. Furthermore, it should also be noted that the decision alone does not finalise the dispute since other matters need to be revisited outside of the Tribunal.  

However, if VAT is being incurred on construction or refurbishment of sports facilities that are expected to be used significantly by third parties the use of a profit making wholly owned trading subsidiary can assist in being able to charge VAT on lets and increase recovery on associated costs.  

If a school uses a trading subsidiary and wishes to apply exemption it is still important that its constitution specifically states that it is unable to distribute profits.

Lets to commercial entities

Lets of sports facilities to entities that use them commercially are subject to VAT at the standard rate since the ‘true beneficiary’ in this instance is deemed as the business and not the individual taking part in the sport. For example, VAT at the standard rate should be applied on lets of a swimming pool to swimming teachers and courts to tennis and squash coaches.

Should you wish to discuss this further, please contact Robert Warne or Kieran Smith

Contact us

Robert Warne
Rob Warne
Partner, Head of VAT and Customs Duty services