Although when introduced it was intended to be a simple tax, Value Added Tax (VAT) is now complex and has a significant adverse impact on sport. The main problems are as follows:
The importance of the tax can be seen from the estimate produced for the Sport and Recreation Alliance by Sheffield Hallam University, which calculated that Government income from tax on sports expenditure is nearly £2.8bn. Most of this will have come from VAT.
The legal landscape
VAT emanates from the European Union. The UK must comply with EU Directives but sport could theoretically, in certain areas, benefit from VAT exemptions, zero rating, or reduced rates.
However, although the UK does allow exemptions from VAT on certain sports services, such as membership fees at a non-profit making organisation, one-off fundraising events or other donations, the UK does not allow sports organisations to take advantage of all the available reductions offered under the EU law.
The Sport and Recreation Alliance has been campaigning in three areas.
The EU White Paper on Sport formalises the EU’s commitment to ensure that sport receives favourable tax treatment, specifically through lower VAT rates and exemptions.
In addition, in a case involving Jeanfield Swifts Football Club, a VAT tribunal recently ruled that the club’s expenditure on a new pavilion could be zero-rated despite the fact that it was not a charity but a registered Community Amateur Sports Club.
Our three campaign areas are as follows:
In addition, any VAT campaign will be accompanied by new guidance for sports organisations on how to deal with VAT efficiently and at minimum cost.
The current economic situation means that tax breaks are increasingly difficult to secure, but the Sport and Recreation Alliance will continue to campaign on this issue.