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HMRC internal manual

VAT Sport Manual

What is an Eligible Body?

The term eligible body is defined as a body which meets all of the following tests (see Notes 2A-2C to Group 10):

  • it is non-profit-making;
  • its constitution does not allow it to distribute any profits or surpluses it makes, other than to another non-profit- making club, or to its members on its winding up or dissolution;
  • it uses all profits or surpluses from its playing activities to maintain or improve the related facilities or for the purposes of a non-profit- making body; and
  • it is not subject to commercial influence.

The meaning of the term commercial influence is defined in section 5 of Notice 701/45 Sport. For the purposes of evaluating the effectiveness of the Sports Order, it should be remembered that the term is limited to specific definitions under the law, principally that within the last three years:

  • no salary has been paid calculated by reference to profits or gross income to an officer, shadow officer or anyone associated with such an officer; or that
  • certain goods or services (relevant supplies) were bought from anyone associated with the club.

The tests for whether a body is non-profit making are principally derived from Kennemer Golf & Country Club v Staatssecretaris van Financien (Case C – 174/00) see VSPORT3010.  The cases of De Vere Golf and Leisure Ltd (Lon/01/055 and 058) VSPORT3020 and Messenger Leisure Developments Ltd ([2005] STC 1078[2005] STC 1078) VSPORT3030 are also key decisions.

The decision in Chobham Golf Club (VSPORT1020) which preceded Kennemer is no longer considered persuasive.  In PJ Hearn & J Hearn T/A Hennerton Golf Club (Decision No: TC04203), the First Tier Tribunal (FTT) concluded that the commercial influence test was a valid condition for the purpose of preventing any possible evasion, avoidance or abuse.  In Abbotsley Ltd and Others (Decision No: TC04781), the Appellants sought to reopen this issue on the basis that it went further than permitted by the Directive, but the FTT decided that it could not deal with the matter because it was a hypothetical question and the Upper Tribunal (UT) refused leave to appeal.

In South Herefordshire Golf Club (Decision No: 19653), the VAT tribunal considered that Note (2A) required an “eligible body” to meet the definition of a non-profit making body ie be an organisation that itself did not have the aim of achieving profits. Profits in that context had a wide meaning, namely, financial advantages that enrich natural or legal persons, in particular those having a financial interest in the organisation. In St Andrew’s College Bradfield ([2017] STC 83) the UT concluded that Note (2A) required there to be specific restrictions on a body’s ability to distribute any profits that it made. That required something more than the consequential restriction on distributing profits that existed because a body was a wholly-owned subsidiary of a non-profit-making body.