VAT issues for sports clubs

The nature of sports clubs is that there are many different sources of income and revenue, each of which may have different VAT liabilities. This means that the VAT position of clubs can be complex, leading to unforeseen VAT costs on day-to-day expenses and large-scale capital projects. 

In recent years, the impact of VAT on clubs has been focussed on the issue of VAT recovery on agents’ fees. This is still a hot topic with HMRC but has been well addressed in the sector. In this article, we have explored some other areas which create risks, and some opportunities, for clubs. If you think your club may be impacted by any of these issues, we would be happy to help advise on these areas specifically or undertake a wider VAT review of the business.

VAT recovery risks

Payments received by clubs can create VAT recovery risks; for example, grants relating to the operation of youth academies whereby clubs may receive support from external bodies in operating their academies. This means that the club receives ‘non-business’ income which can restrict the recovery of VAT. This can result in VAT leakages on large items of expenditure, such as stadium refurbishment costs. Clubs can mitigate these leakages by engaging HMRC to agree VAT recovery methods, but they need to be proactive in doing so.

Many clubs also receive income in return for VAT exempt supplies. A common area where this could arise include commissions on Affinity credit cards, lotteries, raffles or other types of betting activity, or on the hire of rooms, buildings or land. In some circumstances, these income streams can be VAT exempt, which, as with grant income, can result in non-VAT recovery on certain costs. Again, these costs can be mitigated but clubs need to be aware of the risks and be proactive in engaging HMRC in advance of large expenditure projects.

Complex areas of VAT

Many clubs receive payments from governing bodies or leagues. The basic VAT liability of these payments often differs between governing and league bodies and VAT may be payable on the amount received by the club. In some cases, the payments represent distributions of prize or TV money and are not VATable. Each league and/or governing body will have its own view of whether VAT is due on these payments, but it is often not clear if the amount received is VAT inclusive or not.  Clubs should seek clear guidance, from the governing bodies/leagues, whether the payment received is a net or gross amount, to identify any VAT recoverable the club may be entitled to.

An increasing source of revenue for clubs is the streaming of games to fans. The VAT liability of streaming services to international customers is complex but could, in some circumstances, create a VAT liability for the club outside the UK, in the territory where the streaming services are received by the customer.

VAT opportunities

A lot of supplies made by clubs can be zero-rated for VAT. However, revenue from these supplies is often identified incorrectly as standard-rated. Examples may include certain types of food sold to fans at games, items sold through the club shop and exports of goods from the UK. If these items have been incorrectly standard-rated, clubs may be able to reclaim overpaid VAT from HMRC. A liability review often identifies these incorrectly VAT rated supplies and allows clubs to make savings going forward, as well as generate historic VAT repayments.

Impact

Sports clubs are complicated businesses and often have non-core revenue, which is mischaracterised from a VAT perspective, which in turn can lead to both VAT risks and opportunities. In our experience, clubs often benefit from regular VAT reviews to manage the VAT risks, but also identify areas where reclaims can be made to HMRC and savings made going forward.

haysmacintyre’s VAT team can help you with these and other VAT issues. If you have any questions on this matter, or suspect your business may benefit from a VAT review, please reach out to our VAT Partner, Dougie Todd at  dtodd@haysmacintyre.com.