In Queen’s Club Limited v HMRC [2017] TC06119, the First-Tier Tribunal (FTT) allowed full VAT recovery on refurbishments to a members only bar and restaurant, dismissing HMRCs view that the costs were directly linked to the exempt membership fees.

It was largely accepted in the profession, particularly following the Bedale Golf Club case, that where a sports club refurbishes or builds a new bar, restaurant, café or similar, the VAT on the costs would be split in accordance with an appropriate Partial Exemption. The amount allocated to standard rated supplies of catering would be recoverable and the amount allocated to exempt membership fees forfeit.

The case of the Queen’s Club has the potential to create a shift in how these claims are approached:

  • The Queen’s Club recovered VAT in full on the new bar and restaurant on the basis that it was directly and immediately linked, exclusively, to taxable supplies of catering services.
  • HMRC claimed that partial exemption applied and that some of the costs directly and immediately linked to exempt membership fees and function room hire.

The FTT observed the following in reaching its decision:

  • Membership fees were the main source of income and were exempt supplies of services closely linked to sport.
  • The club was under no obligation to provide access to bars and restaurants as part of its membership.
  • The club decided to undertake the works, including closing the café without the consent of members as it was not required.
  • Most members use the club only for sport and only members and their guests can access the bar and restaurant.
  • During the refurbishment works the waiting list for membership increased from 6 years to 10 years.
  • The membership fees increased in line with normal policy despite the closure of the café during that period.
  • The club has no desire to obtain non-playing members and only has a limited number of social memberships due to injuries, pregnancies etc.
  • The bar and restaurant is available to hire, and there is no Option to Tax in place.

The FTT found in favour of The Queen’s Club and allowed its appeal:

  • The costs could not have a direct and immediate link with exempt function room hire as whenever the bar or restaurant was hired, drinks etc. were included. It would therefore be a standard rated supply of catering.
  • If there is a direct and immediate link with membership fees, this must be a direct and immediate link after the costs have been incurred and not based on any historic position.
  • It is accepted that it is a benefit for members to have access to a bar and restaurant and not to have to compete for tables with the general public. It may also be a desirable benefit of membership, but this does not amount to a direct and immediate link.
  • It is clear, based on the number of members, the increase in the waiting list during the refurbishment period, and the fact that the bar/restaurant only takes up part of one floor of one of the four social buildings that its presence does not affect a member’s ability to enjoy the club’s world class sporting facilities.

On this basis, there was only a direct and immediate link to the standard rated supplies of catering and VAT was fully recoverable.

Certainly, for prestigious world class sporting clubs, such as The Queen’s Club, the decision is important and will lead to a shift in the way claims are made. How far reaching the impact of this decision will be is yet to be seen. The key question to ask when looking at these claims is “how important is the non-sporting facilities in attracting new members?”.


Partial exemption

VAT: land and property (notes)

VAT: land and property (at a glance)

Option to Tax

External link: The Queen's Club Limited v HMRC [2017] TC06119


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