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HMRC internal manual

VAT Business/Non-Business Manual

Clubs and associations: EC VAT law on membership supplies by clubs and associations


Article 132 of EC Directive 2006/112 (the Principal VAT Directive) allows EU Member States to exempt from VAT certain activities in the public interest.

Article 132 is qualified by Article 131 as follows:

The exemptions provided for in Chapters 2 to 9 shall apply without prejudice to other Community provisions and in accordance with conditions which the Member States shall lay down for the purpose of ensuring the correct and straightforward application of those exemptions and of preventing any possible evasion, avoidance or abuse.

Within Article 132, the exemptions granted under sub-paragraphs (1)(f) and (1)(l) relate to membership supplies.

Article 132(1)(f)

This Article is concerned with the exemption for necessary services supplied to members by groups who make supplies which are exempt or not subject to VAT. It reads:

(f) the supply of services by independent groups of persons, who are carrying on an activity which is exempt from VAT or in relation to which they are not taxable persons, for the purpose of rendering their members the services directly necessary for the exercise of that activity, where these groups merely claim from their members exact reimbursement of their share of the joint expenses, provided that such exemption is not likely to cause distortion of competition.

This exemption was not previously part of UK VAT law. However, it is soon to become part of UK VAT legislation and full, separate guidance is being drafted for publication in due course.

Article 132(1)(l)

This reads:

(l) the supply of services, and the supply of goods closely linked thereto, to their members in their common interest in return for a subscription fixed in accordance with their rules by non-profit-making organisations with aims of a political, trade-union, religious, patriotic, philosophical, philanthropic or civic nature, provided that this exemption is not likely to cause distortion of competition.

An important point about the implementation of Article 132(1)(l) is that exemption must not be likely to cause distortion of competition.

Trade union nature

Bodies of a trade union nature are discussed in VTUPB Trades unions and professional bodies.

Civic nature

If a body’s activities are not covered by Article 132(1)(l) then they are treated as business. The supplies that it makes to its members are taxable unless exemption is provided for elsewhere in the Directive. The exception to this is those bodies with aims of a civic nature.

The UK did not implement this part of the Article as at that time there was no clear idea of the meaning of the term. HMRC has taken the view that it is not possible to identify a body of a civic nature that would not qualify for exemption from tax on some alternative basis.

If a body were able to satisfy us that it was of such a type and could not obtain exemption otherwise it would be entitled to rely directly upon Article 132(1)(l) for exemption. This is because the civic nature exemption has not been enacted in UK law.

The term civic nature was discussed in the High Court case of Institute of Leisure & Amenity Management. See VBNB75920.