All UK member golf clubs will receive a massive windfall

[Adrian_Stiff]

Today Europe ruled that Bridport & West Dorset Golf Club will receive the Vat that they have paid over the years on the green fees that they have taken. The landmark decsion will see some clubs receiving £1,000,000 back from the government.

Vat at 20% is currently charged on green fees in the UK at All golf clubs.

A members club charging £60 for a round of golf previously kept £50 and passed £10 on to the government.

From now on there is no Vat on subscriptions or green fees for members clubs.

This is the best or worst news depending on your position in golf.

[Mark Pearce]

Who in golf is this bad for?

[jeffwarne]

Wow!
That would seem to be good news for golfers-and obviously a shot i the arm for clubs.

Though in theory could a visiting golfer have gotten that money back at the airport?
hmmmmm........lots of parties of 7 on my credit card over the years

[Adrian_Stiff]

Who in golf is this bad for?

Proprietary golf clubs. They still pay Vat on Subscriptions and Green fees.

[jeffwarne]

Adrian,
can you explain the difference?
Is it a question of % of revenue taken from dues vs. green fees?

[Adrian_Stiff]

A. If a proprietary club say Castle Stuart take £120 green fee it receives £100 and the government get £20
B. If a members club say Dornoch take £120 green fee it receives £120 government get zero
C. If a proprietarty club take £1000 in membership they get £833.33 so lose £166.66 in tax
D. If a members club take £1000 in membership it keeps it.

The C versus D situation has been happening for a number of years now.
The new situation of A v B will make it very difficult for a proprietary club to compete.

99.7% (there are 3 apparently) of all new golf courses in the UK (except where a club has moved) in the last 30 years have been proprietary. If the distortion situation cant be resolved, it would be unlikely that you could ever build a new golf course in the United Kingdom as funding would not be possible.

[Brent Hutto]

I don't see how such a all-or-nothing scenario can be assume, Adrian.

You just said that almost every new club built in recent decades have been proprietary. So obviously the status quo ante massively favored proprietary course creation over member courses, all things considered. I find it hard to believe that a 20% swing in the relative cost/price structure would completely turn that situation on its head.

It seems to me that member clubs will now have a significant but not overwhelming advantage in attracting visitor play, to the extent that a 20% change in price causes a change in visitor preference. It's bad news for proprietary clubs but it isn't like they are seeing their costs increase by 20%, they were already paying the VAT.

[Michael Whitaker]

Let's see how many clubs actually pass the savings on to their customers. My guess is the rates will remain the same and the clubs will just keep the 20% windfall.

[Brent Hutto]

True enough, Mike. It isn't like there's any cost-of-goods or profit-margin reason RCP or any other member club charge X instead of X+20% or X-20%. The pricing is set more based on what the market will bear than on a "cost" basis.

[Thomas Dai]

in theory could a visiting golfer have gotten that money back at the airport?
hmmmmm........lots of parties of 7 on my credit card over the years

This is a very astute and interesting point made by Jeff. Could be time to get your old receipts out folks. Likely to be 20% a sizeable chunk of £$£$.

I'd like to think that the green fee price for playing a members club as a visitor will now reduce by 20%, although I won't be holding my breath as to this. It ought to effect the Entry Fees for Open competitions and Society golf at members clubs too. Also, pro's often receive a percentage of green-fee income for administering the over the counter greenfee transaction at the 'coal-face'. Their percentage of the percentage ought now to be smaller, which is a two edged sword.

I can also envisage some interesting debates at members clubs as to what to spend the windfall money on. I'd like to think it will be spent on courses improvements/ renovations and the like, but somehow I can foresee new carpets, new curtains, new tables and chairs, new patio furniture etc.

Interesting times ahead.

Lots of potential implications. This decision will also come as a nice windfall for the legal folk, bureaucrats and bean counters who will be needed to sort out the details.

ATB

[Mark Chaplin]

Thomas I guess in most clubs it will be used to reduce debt.

[James Boon]

Thanks Adrian,

I had a quick search but couldn't find anything. Have you a link to a news article or similar regarding this?

Many thanks!

Cheers,

James

[Mark Bourgeois]

Hopefully clubs that receive a windfall will use it to make course improvements like adding new back tees, tightening landing areas / bringing in bunkers, and reshaping greens that were okay in the 1800s but which now are inappropriate given 150 years (!!!) of advances in agronomy.

If all this can be done with care and in a manner sympathetic to the original designer, then as a bonus perhaps a little smoothing can be done here and there to reduce blindness. Not totally eliminate it, just reduce it appropriate to the modern game. Let's face it: blindness means nothing in this age of driver launch angles and GPS.

With such improvements we could see Prestwick back in the rota !!!

Fingers crossed the clubs do the right thing and spend their windfall on course improvements.

[Adam Lawrence]

Here's the ECJ judgement. I am working on a story and hope to have something online soon!

http://curia.europa.eu/juris/document/document.jsf?text=&docid=145913&pageIndex=0&doclang=EN&mode=lst&dir=&occ=first&part=1&cid=575700

[Mark Pearce]

Hopefully clubs that receive a windfall will use it to make course improvements like adding new back tees, tightening landing areas / bringing in bunkers, and reshaping greens that were okay in the 1800s but which now are inappropriate given 150 years (!!!) of advances in agronomy.

If all this can be done with care and in a manner sympathetic to the original designer, then as a bonus perhaps a little smoothing can be done here and there to reduce blindness. Not totally eliminate it, just reduce it appropriate to the modern game. Let's face it: blindness means nothing in this age of driver launch angles and GPS.

With such improvements we could see Prestwick back in the rota !!!

Fingers crossed the clubs do the right thing and spend their windfall on course improvements.

Beautifully said.

[Tim Martin]

Hopefully clubs that receive a windfall will use it to make course improvements like adding new back tees, tightening landing areas / bringing in bunkers, and reshaping greens that were okay in the 1800s but which now are inappropriate given 150 years (!!!) of advances in agronomy.

If all this can be done with care and in a manner sympathetic to the original designer, then as a bonus perhaps a little smoothing can be done here and there to reduce blindness. Not totally eliminate it, just reduce it appropriate to the modern game. Let's face it: blindness means nothing in this age of driver launch angles and GPS.

With such improvements we could see Prestwick back in the rota !!!

Fingers crossed the clubs do the right thing and spend their windfall on course improvements.

Couldn't disagree more on the issue of blindness. Regardless of whether you drive it long or have a GPS there are features that instill uncertainty and/or fear in a player like blindness and I think that is the reason why so many of the ODG's used it so liberally. You remember some of the holes at Yale right?

[jeffwarne]

Hopefully clubs that receive a windfall will use it to make course improvements like adding new back tees, tightening landing areas / bringing in bunkers, and reshaping greens that were okay in the 1800s but which now are inappropriate given 150 years (!!!) of advances in agronomy.

If all this can be done with care and in a manner sympathetic to the original designer, then as a bonus perhaps a little smoothing can be done here and there to reduce blindness. Not totally eliminate it, just reduce it appropriate to the modern game. Let's face it: blindness means nothing in this age of driver launch angles and GPS.

With such improvements we could see Prestwick back in the rota !!!

Fingers crossed the clubs do the right thing and spend their windfall on course improvements.

Couldn't disagree more on the issue of blindness. Regardless of whether you drive it long or have a GPS there are features that instill uncertainty and/or fear in a player like blindness and I think that is the reason why so many of the ODG's used it so liberally. You remember some of the holes at Yale right?

I was thinking his post was tongue in cheek, but as always I could be wrong?

[Tim Martin]

Hopefully clubs that receive a windfall will use it to make course improvements like adding new back tees, tightening landing areas / bringing in bunkers, and reshaping greens that were okay in the 1800s but which now are inappropriate given 150 years (!!!) of advances in agronomy.

If all this can be done with care and in a manner sympathetic to the original designer, then as a bonus perhaps a little smoothing can be done here and there to reduce blindness. Not totally eliminate it, just reduce it appropriate to the modern game. Let's face it: blindness means nothing in this age of driver launch angles and GPS.

With such improvements we could see Prestwick back in the rota !!!

Fingers crossed the clubs do the right thing and spend their windfall on course improvements.

Couldn't disagree more on the issue of blindness. Regardless of whether you drive it long or have a GPS there are features that instill uncertainty and/or fear in a player like blindness and I think that is the reason why so many of the ODG's used it so liberally. You remember some of the holes at Yale right?

I was thinking his post was tongue in cheek, but as always I could be wrong?

It is probably on me and my apology to Mark if that is the case.

[Craig Disher]

Adrian,
Do you have a link to anything official on this? I just searched and could only find references to the beginning of the case in 2011 and a delay in the appeal in 2012.

This could be a lifesaver for some of the struggling older private clubs.

[Adam Lawrence]

Adrian,
Do you have a link to anything official on this? I just searched and could only find references to the beginning of the case in 2011 and a delay in the appeal in 2012.

This could be a lifesaver for some of the struggling older private clubs.

Craig - see the link I posted in an earlier reply.

And here is our report on the case:

http://www.golfcoursearchitecture.net/Article/Possible-windfall-for-UK-golf-clubs-as-Bridport-wins-VAT-case/2995/Default.aspx#.UrMyzHlNGxo

[Adrian_Stiff]

I don't see how such a all-or-nothing scenario can be assume, Adrian.

You just said that almost every new club built in recent decades have been proprietary. So obviously the status quo ante massively favored proprietary course creation over member courses, all things considered. I find it hard to believe that a 20% swing in the relative cost/price structure would completely turn that situation on its head.

It seems to me that member clubs will now have a significant but not overwhelming advantage in attracting visitor play, to the extent that a 20% change in price causes a change in visitor preference. It's bad news for proprietary clubs but it isn't like they are seeing their costs increase by 20%, they were already paying the VAT.

Brett- Think of this; most golf clubs struggle just to break even, there is no profit, so to give any head start to your competitor makes it difficult. At 20% it would be impossible. It is not 20% because the members clubs cant reclaim all the vat inputs. The real margin is more 13 or 14%. A lot of a clubs outgoings are labour. VAT has only recently risen to 20% when many clubs started it was only 8%, so currently its dreadful for these type of clubs. They will have an overwhelming advantage and it has already been agreed in court that it is distortion (pre todays ruling). Commercial clubs could sue the HMRC because it is against EU Law, but it takes time. I was told the HMRC could lose up to £3,000,000,000 if they lose every case and the ruling ends up going back to 1971.
Pretty much all new clubs in the last 30 yeas (probably anywhere in the world) are commercial, rarely will someone built a golf course at X millions and give it away. Under the UK situation it might be a labour of love but ultimately you want a return on your money....never is there 25% profits unless you have a real cheap and cheerful course.
Possible outcomes to the situation are.
1 Vat is restored to ALL golf clubs at 20% which mean UK members clubs subscriptions will rise 13-14%.
2 The HMRC treat ALL golf clubs as sports clubs and Vat exempt provided they belong to the EGU/SGU etc.
3 The GOVT continue to ignore the distortion and proprietary clubs go bankrupt or change their use.

The possibilty of 30 nice gentleman getting together (as used to happen) and building a members course with no profit intention is unlikely to happen, as proven by the last 30 -40 years and the number of members clubs.

[Bill_McBride]

M. Bourgeois is the Master of Irony!

[Brent Hutto]

I think by far the most likely outcome is:

4 They all continue to muddle through much as before with the member clubs having a bit more money accruing.

Sure there may be some proprietary club out there just thiiiiiiiiis close to insolvency under the status quo ante. And maybe having the member club down the street cut visitor fees by a few percent draws away an increment of their visitor trade and push them over the edge.

But really, how long is this hypothetical club teetering on the brink going to be around if their neighboring member club were to keep paying VAT? You're making a fairness argument couched in terms of economic gloom and doom. The economic argument doesn't really add up to mass insolvencies among otherwise viable proprietary clubs. You're claiming too much for too little real difference.

Nothing wrong with making a fairness argument. But it is best plainly stated as what it is, in my opinion.

[Mark Chaplin]

Of course the majority of members clubs don't take hundreds of thousands a year in visitor income. The likelihood that HMG will pay out £3b is remote and would have zero public support.

[Adrian_Stiff]

Brett - I am not sure what the casualty rate currently is in the UK. I 'think' only 1 members club has wrapped it up..... so in the main it is commercial clubs that have gone so far.

Assuming that members clubs get a £150,000 averaged windfall they wont be going bust, coupled with the fact they can keep more of the money they were paying in tax.... <<<do you agree?

A neighbouring club that can offer pari passu at a discount to 14% will win the game.....<<<do you agree?

I agree that in a less gloomy market it might be easier. I am not saying all commercial clubs will cease forthwith, there may be someone working on a plan to help commercial clubs, I agree many will muddle on.

All I will say is ask any owner of a golf club and he wont be dismissing the distortion as insignificant. If Proprietary golf clubs were on a stock market today you would have seen the price halved today. So for many today was a very BLACK day.

Do you understand the UK golf market?