West Law Report

Sports club affiliation fees are exempt from VAT

Posted in Times Law Report by mrkooenglish on November 16, 2008

From The Times
November 4, 2008
Sports club affiliation fees are exempt from VAT

Court of Justice of the European Communities

Published November 4, 2008

Canterbury Hockey Club and Another v Revenue and Customs Commissioners Case C-253/07

Before K. Lenaerts, President of Chamber and Judges T. von Danwitz, E. Juhász, G. Arestis and J. Malenovský

Advocate General D. Ruiz-Jarabo Colomer

Judgment October 16, 2008 Affiliation fees paid by sports clubs to an umbrella organisation in return for services supplied by the organisation were exempt from value-added tax if certain conditions were satisfied.

The Fourth Chamber of the Court of Justice of the European Communities so held, inter alia, on a reference by the Chancery Division under article 234 EC for a preliminary ruling on article 13(A)(1)(m) of Council Directive 77/388/EEC of May 17, 1977, on the harmonisation of the laws of the member states relating to turnover taxes – common system of VAT: uniform basis of assessment (OJ 1977 L145/1).

The claimant sports clubs, Canterbury Hockey Club and Canterbury Ladies Hockey Club, were unincorporated associations and members of England Hockey, a non-profit-making organisation for the encouragement and development of the playing of hockey in England.

The member clubs paid affiliation fees to England Hockey which in return supplied certain services to the members, including a club accreditation scheme, courses for coaches, umpires, teachers and young persons, a network of hockey development offices, facilities for accessing government and lottery funding, advice on marketing and obtaining sponsorship, club management services and insurance, and competitions for teams.

The clubs claimed that the services were exempt from VAT, under article 13(A)(1)(m) of the Sixth Directive, but the commissioners rejected the claim on the ground that the clubs were not persons taking part in sport.

The claimants maintained, inter alia, that Item 3 of Group 10 in Schedule 9 to the Value Added Tax 1994 did not properly transpose article 13(A)(1)(m) of the Directive. The Court was asked to rule on whether, to qualify for exemption, the services had to be supplied to individuals.

The Fourth Chamber of the Court held: Although in normal linguistic usage, only natural persons took part in sport, article 13(A)(1)(m) would not be effective for its purpose unless it was construed so as extend to services supplied in connection with sports necessarily practised by individuals in groups of persons, or practised within organisational and administrative structures put in place by unincorporated associations or corporate persons, such as sports clubs.

However, it followed from articles 13(A)(1)(m) and 13(A)(2)(b) of the Directive that the services were eligible for exemption only if various conditions were satisfied.

First, the services had to be supplied by a non-profit-making association.

Second, they had to be closely linked to, and essential to sport, as it was the persons taking part in the sports that were the true beneficiaries. Services which did not meet those criteria, such as advice about marketing and sponsors, therefore did not qualify for exemption.

Third, the services had to not have the basic purpose of obtaining additional income by carrying out transactions that were in direct competition with those of commercial enterprises that were subject to VAT.

The United Kingdom argued that the provision in article 13(A)(1)(m), that only certain services linked to sport were to be exempt, permitted member states to limit the exemption to individuals.

That could not be accepted as the only permissible restrictions on the article 13(A) exemptions were those specified in article 13(A)(2), which did not lay down restrictions as regarded recipients of the services. On those grounds the Court ruled:

1 Article 13(A)(1)(m) of the Sixth Directive was to be interpreted as meaning that, in the context of persons taking part in sport, it included services supplied to corporate persons and to unincorporated associations, provided that, which it was for the national court to establish, those services were closely linked and essential to sport, that they were supplied by non-profit-making organisations, and that their true beneficiaries were persons taking part in sport.

2 The expression “certain services closely linked to sport” in article 13(A)(1)(m) did not allow the member states to limit the exemption under that provision by reference to the recipients of the services in question.


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