HMRC Concludes Kickboxing Company Is NOT Exempt From VAT

A martial arts kickboxing company disputed paying VAT with HMRC, claiming they should be exempt from as they provide a form of tuition, has lost the dispute. The tribunal ruled that ‘kickboxing is not an activity which is commonly taught at schools or universities in the European Union.’

The dispute started in April 2017 after HMRC began a VAT enquiry into the company and HMRC claimed the company had a VAT liability of over £400,000 for output tax for it supplies of kickboxing classes between 2011 and 2017 because the classes were not exempt, they should be taxed at the standard rate of 20%.

The company, started up in 2010, argued that kickboxing is a form of tuition as it is covering a part of school education and should be exempt from VAT on supplies and acquisitions. In September 2017, the company requested a statutory review of HMRCs decision, HMRC responded 6 weeks later that the VAT payment was due but they would move the registration date forward a month. Following the statutory review process, an alternative resolution process was entered in to and in March 2018, when HMRC advised the company that the original VAT output tax assessment was cancelled and the date of registration for VAT purposes was amended to 1st April, 2018. This meant that the company should register for VAT on 1st April, 2018 and the classes would be standard rated for VAT purposes from this date as prior to April 2018, the company reported fee income below that VAT threshold.   

At the tribunal, the judge stated ‘that it is possible for tuition of an activity in a school to involve a transfer of knowledge and skills from teacher to pupils and yet still fall outside the exemption in the Article because the activity is purely recreational.’

In conclusion, the judge stated: ‘kickboxing has no single governing body and, correspondingly, that there is no externally-set syllabus and no externally moderated grading system. The subjective nature of the grading system in certain martial arts was a factor in the Department of Education’s decision to exclude those martial arts from the UK’s national curriculum.’

One of the basic conditions of HMRCs (VAT Notice 701/45) Sport supplies that are VAT exempt is that the organisation has a recognised, eligible body.



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