The exemption for sporting services was introduced in 1994 and retrospective application to 1990 was allowed if non profit making bodies wished to do so giving exemption full effect, including input tax restriction under partial exemption rules. This followed a legal challenge by the Central Council of Physical Recreation against non-exemption and legal advice that the European VAT agreements require Member States to tax supplies by commercial clubs and to exempt supplies by non-profit- making clubs.
However, it soon became clear that certain commercial sports clubs were adopting artificial restructuring arrangements for the purpose of avoiding VAT on charges for use of their facilities, against the intention of both UK and European legislation
Following the Commissioners’ loss in - Chobham Golf Club (LON 96/833) (see below), Customs and Excise introduced a Statutory Instrument in 1998 to prevent avoidance schemes implemented by certain golf clubs and other sporting bodies, but this inadvertently caught some genuine non-profit-making bodies and was withdrawn. Subsequently, the Value Added Tax (Sport, Sports Competitions and Physical Education Order 1999 (SI 1999/1994) was introduced, taking effect from 1 January 2000. This addressed the concerns raised by the main representative sports bodies that the original SI could deny exemption to clubs that were not involved in avoidance.
Chobham Golf Club  (Trib.14867).
Chobham Golf Club was originally a proprietary club, but became a membership company once it was sold by the holding company which owned it. The club paid a significant rent to a landlord company which, owned the golf course, and a management fee to a management company, who together formed a VAT Group. The club secretary had a significant financial interest in both the management and the landlord companies.
The Commissioners took the view that, looking at the arrangements as a whole, the basic motive of the club was a commercial one, of obtaining income for the management and landlord companies.
The Tribunal Chairman, relying to some extent on the earlier case of Bell Concord Trust  4 BVC 51, concluded that the club’s income was not the same as its profit, and that once the club paid the rent and management charges to the landlord and management companies, any surplus was distributed to its members. This meant that the club was within the definition of a non-profit- making body and that its supplies to its members qualified for exemption under Group 10 Item 3.