VAT Exemption for Tournament Fees – A Bridge Too Far

The first-tier tribunal has ruled that Bridge is not a sport and as a result tournament entry fees are not exempt from VAT.

The English Bridge Union (EBU) were appealing HMRC’s decision not to repay VAT on £631,000 on tournament fees raised between 30 June 2008 and 31 December 2011.

Background

Under current UK legislation entry fees may qualify for exemption where:

  • they are for entry to a competition in sport or physical education and the total amount of the entry fees charged is returned to the entrants of that competition as prizes; or
  • they are for entry to a competition promoted by an eligible body, which is established for the purposes of sport or physical recreation.

HMRC’s VAT notice Notice 701/45 provides a list of all the sports and physical activities that it believes qualifies for the exemption.

Taxpayers Arguments

The EBU argued that Bridge was a sport for a number of reasons:

– it is recognised as a sport by the Olympic Committee

– The natural meaning of “sport” is not limited to activities which principally involve skill or exertion

– Bridge is on a par with darts, croquet, billiards, flying and gliding (accepted as sports by HMRC) in that physical activity plays second fiddle to mental skill

They also argued that bridge unions in France, Holland and Belgian (amongst others) were not required to pay VAT on their entry fees.

HMRC’s Arguments

– Sport is something that involves physical activity or fitness and the European article defining the VAT exemption was intended to promote physical and mental health

– Bridge does not involve a significant element of physical activity or fitness

Tribunal’s Ruling

The tribunal concluded that the normal English meaning of “sport” involves a significant element of physical activity and stated that “sport normally connotes a game with an athletic element rather than simply a game”.

Bridge does not contain an athletic element and therefore does not meet the conditions necessary for the VAT exemption.

Implications

Some commentators have likened the case to the great biscuit/cake debate around Jaffa Cakes; however this ruling seems much clearer cut and is unlikely to garner much media attention.

The ruling should not have any wider implications other than to reinforce the definition of what constitutes a sport for VAT purposes as initially established in the Royal Pigeon Racing Association Case (VDT 14006).

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