First Tier Tribunal decision regarding VAT partial exemption – whether VAT incurred on refurbishment of tennis club is recoverable.

The Queen’s Club Limited makes exempt supplies of sporting services to its members and taxable supplies of food and drink in its bars and restaurants. The Club renovated its restaurant and bars and recovered VAT on the costs of renovation.

HMRC argued that the VAT incurred on the renovation should be recovered under the Club’s partial exemption method. The Tribunal, however, agreed with the Club.

The VAT incurred relates to the taxable supplies of the Club and could be recovered in full. Although members benefited from the renovation, the Tribunal decided that there was not a direct link between the renovation costs and the exempt supplies. There was a direct link between the renovation costs and taxable supplies that the Club made. The appeal was allowed.

If you have a business with exempt supplies, make sure that you take robust advice on VAT reclaims as it's a thin line between what is and isn't allowable. Call us on 01249 816810 if this applies to you.