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HMRC internal manual

Business Income Manual

Meaning of trade: mutual trading and members clubs: golf clubs: computation of profit

Apportionment of expenditure

Income arising to a members’ golf club from the provision of services to non-members is taxable as trade profits where such provision amounts to the carrying on of a trade. What constitutes a trade is described at BIM24045.

The question then arises as to the amount (if any) of the club’s expenses that are to be set against the receipts derived from that source. This point was discussed in the case of The Carlisle and Silloth Golf Club v Smith [1913] 6TC48 & 198 - see BIM24455. The courts rejected an approach based upon apportioning expenditure in proportion to the income derived from non-trading in comparison to the club’s total income. Instead the courts referred the matter back to the Commissioners (the predecessors to the Tribunal) with instructions to apportion based on the appropriate degree of usage of the various facilities and other matters involved.

You should therefore contend that the allowable proportion of expenditure on course maintenance be based on usage. That is, the proportion which visitors’ rounds represent of the total of members’ and visitors’ rounds.

An apportionment based on income is unlikely to give the correct figure because although the visitors’ will be charged a commercial rate based on number of rounds played the same is unlikely to be the case with members who pay a fixed subscription irrespective of the use they make of the course. This approach was also specifically rejected by the courts in Carlisle and Silloth.


Computing trading profit

Trading income

Where a members’ club provides services and facilities to non-members on a commercial basis all transactions between the club and non-members are trading transactions. Green fees are the most obvious source. There may be other items such as bar, catering and gaming machine receipts but see BIM24315. Other income will depend on the facilities available. For example, fees for conferences and wedding receptions may be generated if the club has suitable accommodation. On the distinction between different classes of member and the treatment of so-called temporary members’ see BIM24220 - BIM24230.

Where the visitor is the personal guest of a member (that is to say, where the member bears the cost) you should accept that no taxable profit arises. Thus the green fees to be included are the net fees being the total receivable from non-members less the amount included therein which was received from members in respect of their personal guests.

If bar and related income derived from sales to non-members is small this should be ignored on de minimis grounds. But where the bar and other refreshment facilities provided by the club to non-members are organised on commercial lines or the club brings in expenditure on bar and catering facilities as a deduction the income from those sales should be taken into account in determining the club’s trading income tax liability.


Allowable expenditure

The expenditure shown in the club’s accounts should first be examined on normal lines. The accounts may not have been prepared with tax considerations in mind and it may be worthwhile considering whether there is any capital expenditure included in the profit and loss account. It is also important to establish whether any expenditure relates to items totally divorced from visitors’ activities. For example, some bars or other areas of the clubhouse may not be open to visitors. Expenditure on their maintenance, repair, etc. should be totally excluded.

Expenditure falls within three broad headings:

  • wholly for members
  • partly for members, partly for non-members, and
  • wholly for non-members.

You should disallow all of the expenditure in the first category. You should allow all of the expenditure in the third category. You will need to apportion expenditure in the second category.

The expenditure on course maintenance should be apportioned according to usage. This requires an apportionment factor, which is:



Number of non-members’ rounds, divided by:
Total rounds played by members and non-members.




In the absence of specific information you will need to estimate the total number of rounds played by members and non-members during the year, bearing in mind the following:


Number of playing days per annum

Courses are normally open throughout the year. There may be records of the days when they have been closed because closure will require a decision to be taken by the secretary or professional. Developments in golfing clothing and equipment mean that the game can be played in most conditions and the course will only be closed when, for example, it is waterlogged. An independent study for the Sports Council (Study of golf in England, Sports Council, November 1992) showed that the average members’ club was closed for ten days per year. It would therefore not be unreasonable to assume that 350 days per year are available for play.

Average playing hours per day

The playing hours are largely determined by the hours of daylight. This may be as little as eight hours in the winter and more than 16 hours in the summer. Sufficient time after tee-off is required to complete a round. The time for a round will depend on the number of holes and the nature of the course. In winter the time may be less than in summer because shorter courses may be used and players may play nine holes rather than eighteen. An annual average of 8 to 10 hours per day would appear to be reasonable.

Number of games per hour

The number of games teeing off per hour can be estimated with some accuracy. In competition games start every six minutes, giving ten per hour. At periods of high usage outside competitions this rate may be reached but for calculation purposes nine games per hour is perhaps more typical.

Number of players per game

The number of players per game is likely to be three or four. Very few golfers play alone and the Sports Council survey shows that few pairs play. A figure of 3 to 3.5 would appear reasonable.

Course usage

Multiplying these factors will give the maximum course usage. Conservatively, using the lower of the figures (350 x 8 x 9 x 3) gives a maximum course usage of about 75,000 rounds per year.

In practice courses are not used to the maximum extent. They will typically be very heavily used at weekends and less so in midweek. Similarly there will be lower use in the winter compared to the summer. Visitors will be encouraged to use the course at times of low use so as to minimise disruption to members. If 100% of the maximum is assumed for Friday to Sunday inclusive and 50% for the midweek period in summer, with corresponding figures of 75% and 25% for winter the result is an overall usage of just over 50%. Thus the actual number of rounds may be around 35,000 to 40,000.

This result accords well with the Sports Council study in which members’ golf clubs estimated total rounds between 27,000 and 43,000 per annum depending on region.

Further support for the figures can be obtained from the number of members and their average number of rounds per year. Both the Sports Council report and a 1990 general household survey found that golfers played about once a week on average. The Sports Council survey suggests that club members play rather more than the general golfing population and may, on average, play between 50 and 60 times per annum.

It should be stressed that some members will play 4 or 5 times a week or more. An average figure of 50 rounds per annum includes both these members and those who play infrequently or not at all.

The number of club members multiplied by a factor of 50 should produce a result consistent with the total number of rounds per annum as calculated above. Due allowance for visitors’ rounds (see below) will be required.

Within any particular club some evidence of the rounds played by members can be obtained from the competition records. Most clubs hold a variety of league and cup competitions throughout the year.

Details of the numbers of entrants and the numbers of rounds may provide some data although it will still be necessary to estimate the number of ‘casual’ rounds played by members. The probability is that the majority of rounds played by members will normally fall into this ‘casual’ category.

Visitors’ rounds

Visitors’ rounds will normally be far fewer than those played by members. Although the number of visitors will probably be accurately recorded the number of rounds they play may not always be available. A casual visitor may play a single round while a corporate hospitality event or visiting party may involve the participants playing one round before lunch and a second round in the afternoon. The average is likely to be between one and two.

Some understanding of the type of visitor and the club’s pricing structure may allow this figure to be ascertained more accurately. The prices for a visitor’s round during the week and at weekends and for a visitor’s day ticket (two rounds) during the week and at weekends will probably be fixed for the season. Thus the fee paid by a visitor may indicate the number of rounds played by that visitor. Equally, correspondence with visiting parties and other related records may include documents specifying the number of rounds to be played.

Use of apportionment factor

The proportion of course usage as estimated above should be applied to most expenses from which visitors can be said to derive some benefit. But it may be that the facts of a particular case are such that a different proportion of some expenditure should be allowed. Salaries may be especially in point here.

For example, if the club employs a visitors secretary and it can be shown that the secretary’s duties are in fact totally concerned with visitors the whole of the salary can be allowed. If this is the case little or no deduction for the club secretary’s salary would appear appropriate.

The club professional’s contract may specify that some percentage of green fees are payable to him. This can be allowed as a deduction but no further deduction in respect of the professional’s salary would be allowable unless the facts warrant it. Such indication may be found in a contract that requires the professional to devote a proportion of their time to visitors.

If any proportion of the salary of a bar steward or catering staff is claimed as a deduction the same proportion of income from that source would normally be brought in as trading income.

Ministerial assurances

Clubs may quote from a letter from the then Chancellor of the Exchequer, Norman Lamont, to Lord Whitelaw:

‘…where clubs earn such profits, they may set expenses incurred in earning these profits against their liability to tax…the allowable expenditure may include not only the direct costs of providing for non-members, but also a reasonable proportion of general expenditure on the facilities of the club.’

There is nothing in the contents of this letter that we dispute. The problem is how to arrive at the reasonable proportion of expenditure to be allowed.

Different patterns of course usage

The question of appropriate estimates has been discussed above but alternative figures, either in detail or summary form, may be put. Usually, all the figures will be based on estimates. In many cases the result of the estimates is to understate the total number of rounds played and overstate visitors’ rounds while understating members’ rounds. Consequently the visitors are shown to play an unduly high proportion of all rounds on the course and an unduly high proportion of expenditure is set against the income. A secondary result is that club members are shown as playing a very low average number of rounds per year. It then becomes necessary to consider whether there are special factors explaining why they play so little.

Any claim that the average member of a particular golf club plays less than 50 rounds per year should be viewed critically.

It will be apparent that the apportionment factor can be adjusted by making inappropriate assumptions regarding the number of rounds played by visitors. For reasons discussed earlier the number of visitors’ rounds is likely to be the number of visitors multiplied by a factor between one and two. The precise factor will depend on the type of visitor at the course.