By the release of the judgment in Berkshire Golf Club, the First-tier Tribunal has given its first judgment on unjust enrichment since the 2003 judgment from the CJEU in Weber’s Wine World, in which it was made clear that establishing unjust enrichment is an economic exercise. This case amply demonstrates that unjust enrichment is a complex and challenging (and expensive) defence for HMRC to cite. However where HMRC have been prepared to incur the substantial economic analysis investment that citing and proving unjust enrichment requires, the taxpayer may face a similar outlay in rebutting HMRC’s assertions. So what does this mean for the future of this defence?
As background, on 19 December 2013 the Court of Justice of the European Union (CJEU) considered the liability of visitor green fees charged by non-profit making members’ golf clubs in Bridport and West Dorset Golf club (C-495/12). The CJEU determined that an exemption should apply to these green fees, as they were a supply of sporting services by an eligible body for the benefit of an individual playing sport. The fact that the individual in question was not a member of the club had no bearing on the liability for the fee.
Following this decision, the UK changed the scope of the sporting services exemption to remove the membership condition, with effect from 1 January 2015. Many clubs had submitted claims for VAT overpaid from 1990 (the date from which the UK implemented the exemption provisions) on visitor green fees. Consistent with the judgment against them, HMRC paid Bridport’s claim in full but then wanted to consider whether to invoke the unjust enrichment defence in respect of these other claims.
Unlike the more normal position for a VAT tribunal case, the burden of proof lies with HMRC to establish the amount of a repayment claim that would unjustly enrich the taxpayer. The three appellant clubs in Berkshire Golf Club and others, together with Bridport, were selected as being broadly representative of the different types of UK golf courses. HMRC instructed an expert economist and an economic consultancy to gather evidence from the four clubs, seeking to establish the economic circumstances for unjust enrichment.
In a recent article for Tax Journal1, Amanda Brown and Karen Killington examine the FTT decision in this case, which in the writers’ opinion amply illustrates that the Advocate General in Commission v Italy was right. The economics of unjust enrichment are fraught with difficulty.