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HMRC internal manual

VAT Business/Non-Business Manual

HM Revenue & Customs
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Clubs and associations: Wimbledon debentures

The original issue

In 1986, the All England Lawn Tennis Ground Limited issued a series of debentures. To get one of the debentures the buyer had to pay both the nominal value and an additional premium.

The debentures were redeemable at par after a five year period. Par is the nominal face value. As a result their face value would eventually return to the buyer.

As well as the right of repayment of the nominal sum at the end of the period, holders were entitled to:

  • free entry to Wimbledon; and
  • a reserved seat in the Centre Court for each day of play of the Lawn Tennis Championships for each year that the debenture remained unredeemed.

The nominal amount paid by the holder is payment for an exempt debenture but the amount paid as a premium is payment for a taxable supply of benefits. The benefit is the right of admission to watch the tennis.

Further debenture issues

Further series of debentures have been issued. The initial issue was to be redeemed by 1 August 1990 and only carried Wimbledon entrance entitlements up to that date. The accompanying entitlements with subsequent debentures have included:

  • free attendance with a reserved seat at Centre Court for each day’s play of the Championships in the years covered by the debenture;
  • access to a Debenture Holders’ Lounge; and
  • entry into a ballot for a number of specially reserved parking spaces at the ground.

The 1989 issue was for a nominal £2,000 plus premium of £15,000, redeemable at par on 1 August 1995. The nominal £2,000 was exempt and the £15,000 premium was standard-rated.

Onward sales of Wimbledon debentures

Unlike the onward sales of debentures by members of clubs generally, the onward sale of a Wimbledon debenture is likely to require VAT to be accounted for by the seller. Wimbledon debentures are often bought by corporate traders who use the accompanying admission entitlements for corporate hospitality or staff perks.

They will often sell the debentures on to other companies who are buying them for the same purpose. In contrast to the majority of sales of club debentures that onward sale is a business activity.

Any profit arising on the subsequent debenture sales is to be distributed in the same ratio as the original exempt and standard-rated values. The following formula should be used - the 1989 issue values have been taken as an example.

### Original Sale      
Selling price = £17,000  
Nominal value = £2,000 (exempt)
Premium = £15,000 (standard-rated)
VAT on premium = £2,250  
    £19,250 Total
### Subsequent Resale          
New sale price = A      
A x £2,000 = B (exempt)
A x £15,000 = C (standard-rated)

It is very unlikely that the debenture would be sold on at a loss. If this happens the loss should also be distributed in proportion to the original exempt and standard-rated values.

The onward sale is not wholly exempt or has the value of the exempt supply increased to a greater extent than that of the standard-rated one. Indeed it could be said that the profit should only be attributed to the standard-rated supply. At eventual redemption the holder is only repaid the original nominal value so all the increase in value could in theory relate to the standard-rated supply.