Key court cases dealing with the sporting exemption: Messenger Leisure Developments Ltd (Lon/02/59)
Messenger Leisure Developments Ltd (LON/02/59) did not qualify as a non-profit making body under the tests outlined in Kennemer.
In Messenger, the appellant was a wholly owned subsidiary of a commercial group. The parent company (Leisure) made the land for running golf courses available to the appellant for no consideration.
However, the appellant’s profits were distributed by an inter-company loan agreement to the parent company. The chairman of the VAT Tribunal found that the loans although charged at a commercial rate were not the subject of any restrictions such as might be found in a normal commercial situation. He concluded that the appellant’s profits were in fact covertly distributed: the appellant had failed to bring himself within the provisions of Article 13A.2(a) of the Sixth Directive (now Article 133(a) of Directive 2006/112).
Messenger Leisure Developments Ltd shows that the term “commercial influence” under the Sports Order does not catch all forms of covert distributions of profit, and that Kennemer offers a wider scope for preventing tax avoidance schemes.
If you are in any doubt or difficulty about the application of the tests for commercial influence and non–profit-making body, you should contact your TAPE team.