On July 13, 2017, the  European Court of Justice (ECJ) passed a judgment on the case of the London Borough of Ealing Vs Her Majesty’s Revenue and Customs (HMRC ). The case was regarding the right to exempt VAT on admission fees to sports facilities as per the VAT Directive which grants exemption on supplies of services linked to sport and physical education.

Case Summary

The London Borough of Ealing is a local non-profit organisation that runs a number of sports facilities, such as gymnastic halls and swimming pools.

From 1 June 2009 to 31 August 2012, it accounted for VAT levied on the amounts charged for admission to those facilities. In 2013, it applied for repayment of the VAT from the tax authorities on the grounds that VAT should be exempt on the basis of Article 132(1)(m) of Directive 2006/112 which exempts VAT on charges for admission to sports facilities.

When the local tax authority rejected their application, the London Borough of Ealing brought an action against that decision before the First-Tier Tribunal (Tax Chamber). The Tribunal further decided to refer the case to the ECJ for a preliminary ruling.

The ECJ found that the UK tax authorities were incorrect when not allowing local authorities to exempt VAT under the provision of sporting facilities. The supply should be exempt to ensure there is no distortion of competition between public and private bodies.

The ECJ passed the judgment in favour of the taxpayer and decided that both the public body and non-profiting private bodies that offer sporting facilities, should be subject to the same restrictions. The HMRC has accepted the decision and local authorities may treat these supplies as VAT exempt.

How does this affect your business?

As a result of this judgment, local bodies that submitted claims for overpaid output VAT can expect their VAT back. Those local bodies who wish to continue to rely on the treatment of the domestic legislation can do so until the VAT Act is amended.

Click here for the detailed proceedings of the court