The Advocate General of the European Court has provided their opinion for sporting services provided by local authorities, the NHS and other public bodies. Will the VAT liability change and have you potentially overpaid VAT?
In the case of the London Borough of Ealing versus HMRC [C 633/15] previously referred to the Court of Justice of the European Union (‘CJEU’), the persuasive opinion of the Advocate General (‘AG’) has now been released.
As a brief background, the supply of certain sporting services by eligible bodies are treated as exempt from VAT in the UK where all relevant conditions are met. However, by way of legislative exclusion ostensibly to (partly) implement a non-distortion of competition option, all local authorities and most public bodies have been excluded, thus output tax has had to be paid over to HMRC in relation to past incomes as such has been treated as standard rated for VAT.
Whilst not formally binding, the AG’s view is the UK may not exclude bodies governed by public law from the benefit of the exemption of supplies of sporting services without having specifically considered each individual case as to whether it is acting as a public body in providing the services, and whether the granting of VAT exemption would cause a distortion of competition (to the disadvantage of commercial enterprises).
Pending formal decision by the courts, it is likely that public bodies may not be excluded from the benefit of exemption where all other qualifying conditions have been met. Potentially, this may also open to the door for backdated VAT claims should it be accepted that the UK was in breach of EU law.