What is a
sport?
You and I
have probably encountered that shiny-sparkly when discussing NASCAR.
But can it
have a tax angle?
Oh, grasshopper.
Even circles take on angles when you tax them.
Let’s travel
to the UK. Their 2011 Charities Act defined sports as “activities which promote
health involving physical or mental health or exertion.”
Introduce
Sport England. They distribute National Lottery funding to encourage people to
be more physically active. Seems a desirable cause.
It helps to
be a sport if you want to tap-into that pot of Lottery gold.
Enter the
English Bridge Union.
They want
in.
The EBU has
battling HMRC (that is, the British version of the IRS), arguing that entry
fees to bridge tournaments should be exempt from VAT (“value added tax,” a sort
of super sales tax). HRMC in turn looks to Sport England when developing its regulations.
The EBU argued that the “physical or mental health or exertion”
wording in the 2011 Act does not require physical activity.
But that is
not Sport England’s position. They argue that the goal of sports is to increase
physical activity and decrease inactivity.
That is not to argue that activities such as bridge do not help with
mental acuity and the relief of social isolation; it just means that it is not
a sport.
The EBU brought
a refund suit against HMRC for VAT paid between 2008 and 2011. The amount is not
insignificant: for 2012/13 alone it was over $800,000. The case went before the
High Court of Justice of England and Wales.
The Court ruled
that Sport England was within its rights to emphasize physical activities over
mental and that Sport England could deny bridge status as a sport. Extrapolating,
HMRC does not have to refund VAT paid on bridge tournament fees.
But the
Court simultaneously added that it had not been asked to answer the “broad,
somewhat philosophical question” as to whether bridge was actually a sport.
Seems both
sides have a drum to beat following this decision.
By the way,
the British courts have a different way than American courts. The lawsuit cost
the EBU approximately $150,000. But they lost. They have also been ordered to
pay approximately $75,000 to Sport England as reimbursement of their legal
expenses.
COMMENT: I like this idea.
The EBU went
to the Court of Appeal in London, where they lost earlier this year. They then
appealed to the EU courts.
Here is
Advocate General Maciej Szpunar of The European Court of Justice determining
that bridge is a sport because it requires
… a certain effort to overcome a challenge or an obstacle” and “trains a certain physical or mental skill.”
The Advocate
General’s decision will in turn be reviewed by the full Court en banc.
Soon an EU court
will review a British tax decision. My understanding is that the British would not
have to observe an adverse EU decision, but such a decision should nonetheless carry
considerable persuasion.
And the
Brits argue what constitutes a sport … because they have decided to tax
something unless it is a sport. Well heck, all one has to do is remove “sport,”
replace with another word, and we can continue this angels-on-a-head-of-a-pin
nonsense until the end of time.
I do sympathize
with the EBU. The HRMC, for example, recognizes both darts and snooker as sports,
whereas you and I would recognize them as activities played in a bar. Several
European countries – Austria, France, Denmark and others – already recognize
bridge as a sport. To be fair, there are other countries – Ireland and Sweden,
for example – that do not.
Did you know
that the International Olympic Committee classified bridge as a sport back in
1998?
But still…
I have difficulty
with the concept of a “mental sport.”
By that
definition tax practice – that is, what I do professionally – is a sport.
