UT confirms football pitch hire was an exempt composite supply

In HMRC v Netbusters (UK) Limited [2022] UKUT 00175, the Upper Tribunal (UT) confirmed that the provision of football pitches and league management services were one single composite supply and so exempt from VAT.

• Netbusters organises 5-a-side football and netball league matches. The pitches are also hired out separately to members of the public. The league is organised and run by Netbusters.
• Following the Goals Soccer Centres plc v HMRC (TC 02253) decision and publication of Revenue & Customs Brief 8 (2014), Netbusters submitted a claim for over-declared output VAT of £414,622 on the basis that its supplies were:
  • Partly exempt (the supply of the pitch or court) and
  • Partly taxable (the supply of league management services).
• The claim was refused by HMRC who claimed that the supplies were actually Standard rated supplies of competitive league sports management services.
• On appeal to the FTT, it was held that the services made up one single Composite Supply, which was "the grant of any interest in or right over land or of any licence to occupy land". Under Sch 9, Group 1, VATA 1994, these supplies are exempt from VAT.

HMRC appealed to the UT, on the basis that the FTT failed to consider and apply the "passivity principle" or the objective character/economic reality of the supplies.

The UT found that:

• Whilst the letting of immovable property can be a low value, passive activity, the facts of the case were distinguished from previous case law due to the high value attributable to the activities of the appellants. Passivity is just one of a number of features that the letting of immovable property can have and it should not be definitive in establishing the value of the supply.
• The FTT considered all of the relevant caselaw and assessed the character of the supplies. The FTT acknowledged that there were two supplies: one of pitch hire and the other of league administration and whilst both enhanced the other, it was the latter that had only a modest value.
• On this basis, the FTT had not erred in law and had reached a reasonable conclusion both on the characteristics of the supply and the value, based on the facts available.

The UT upheld the FTT's decision that it was a single composite supply, exempt from VAT and the appeal was dismissed.

Useful guides on this topic

Supply of football and netball pitches exempt from VAT
In Netbusters (UK) Ltd v HMRC [2020] TC07915, the First Tier Tribunal (FTT) allowed the taxpayer’s appeal finding that a single exempt supply of football and netball pitches was made.

Land & Property: Non-residential
This guide considers the VAT treatment of the supply of non-residential property.

Mixed supplies: Single or multiple supply?
Where a business supplies mixed services it is important to establish whether this is a single supply or multiple supplies if different VAT rates may apply.

Partial exemption & input VAT
How do you calculate the amount of input tax you can recover under the VAT partial exemption rules? What are the de minimis rules?

External links

HMRC v Netbusters (UK) Limited [2022] UKUT 00175

Netbusters (UK) Ltd v HMRC [2020] TC07915