06 Jan Don’t Assume Your Building Project Will Be VAT Free
The recent case of Eynsham Cricket Club has again highlighted the need for clubs to get advice directly from HMRC when considering any form of building project.
The club were wrongly informed by independent experts that their new pavilion would not be subject to VAT because they were registered as a Community Amateur Sports Club and were not for profit. The club went ahead with the project but were then told last September by HMRC that the building project would be subject to a £34,000 VAT bill, money the club does not have and could now mean that the club is forced to close.
The club enlisted the help of the Prime Minister, their local MP, to fight their case but David Cameron wrote to the club last March to advise them that “it is not promising”.
A HMRC spokesperson stated that:
The construction of a new building that is to be used solely for a relevant charitable purpose (which includes village halls) is VAT zero-rated.
To qualify for this relief, a village hall must be run by a charity as a community facility for the benefit of the community. A Community Amateur Sports Club is not a charity.
Sports club facilities that are available to the wider community do not qualify as a village hall even if the sports club is a charity.
Can VAT Ever Be Claimed Back on a Building Project?
If a club is planning to build a new clubhouse or pavilion, it is vital that the project is planned in detail and rulings sought from the relevant authorities before building work begins.
For example, a club wishing to claim VAT back on their project may consider becoming VAT registered and determine what non-member use the building could be used for, e.g. hiring to local groups and individuals, use by visiting teams, social events, etc.
In general, the more the building is used by non-members, the greater is the potential for VAT to be claimed back. This is because a VAT registered club can claim VAT back on non-exempt supplies, i.e. non-member activities.
Please note that this is an extremely complex area and any club considering such a project should seek expert advice from their national governing body and from HMRC directly before they begin construction.
It is also important to note that a club should also be willing and able to challenge any adverse ruling from HMRC at an independent tribunal – clubs have done so in the past and had HMRC rulings overturned.
Clubs should NOT commence any building project until they are certain of the VAT position, i.e. they have a ruling from HMRC that they can rely on.
Contact us if you need further clarification or visit our support centre for further free expert online advice and support.