The VAT rules on membership fees and complex but some types of membership are VAT exempt
- Professional Bodies
- Trade Unions
- Learned Societies
- Political Parties
However, in general HMRC considers that where a subscription fee is paid to a membership body in return for benefits then it will be subject to VAT.
VAT notice 701/5 states..
Which of my activities are business activities for VAT purposes?
These include:
- providing benefits to members in return for membership subscriptions (for members racing clubs where subscriptions finance the purchase of racehorses see Notice 700/67 Registration scheme for racehorse owners)
- providing benefits to members in return for a separate charge
- making supplies to non-members for a charge
- admission to any premises for a charge
- providing catering, social and other facilities to non-members in return for a charge
HMRC’s advice is set out in VBNB606600
The general rule is that subscriptions are consideration for a package of benefits. The liability will follow that of the various supplies being made. Therefore, you will need to apportion the subscription unless all of these supplies have the same liability.
Our historic view that membership benefits supplied in return for a subscription constitute mixed supplies that need to be apportioned rather than a single supply was taken in the case of The Automobile Association (see VBNB75960). In that case the High Court accepted the AA’s subscription charge was for a mixed supply of their magazine, the key to the AA box insurance and various other services.
However, following the decision in Card Protection Plan (see VBNB75960) we concluded that our previous approach was wrong in law. The subscriptions of a members’ club were usually consideration for a bundle of supplies, each of which is for the better enjoyment of the principal supply, and all the supplies therefore share the same VAT liability.
We did, however, accept that in some cases there were two or more supplies, each of which was an end in its own right. In those cases apportionment was the proper treatment. Where a business had incorrectly treated its supplies as mixed under the old legal understanding, we took no action and we introduced ESC 3.35 to allow non-profit making members’ clubs to continue to do so.
Normally a body will apportion its subscriptions either in relation to the costs that it incurs in making the supplies or in relation to the price at which the supplies are separately available (a market value method). However, here are no fixed rules requiring apportionment by a particular method. Any method is acceptable as long as the end result is fair and reasonable.
steve@bicknells.net
