This part of GOV.UK is being rebuilt – find out what beta means

HMRC internal manual

VAT Business/Non-Business Manual

Clubs and associations: have the members given a subscription or other consideration?


One of the requirements for a body to fall within section 94(2)(a) of the VAT Act 1994 is that members must pay a subscription or give other consideration for the benefits which they enjoy.


The term subscription is not defined in the VAT Act. It should take its everyday meaning, which is a payment that:

  • gives a person membership of a body;
  • entitles them to take part in the body’s activities; and
  • entitles them to receive the benefits that the body supplies.

The term that a body uses to describe payments received from its members is not conclusive evidence of the nature of those payments. Many charitable bodies will refer to payments from members as donations when they are actually referring to subscriptions.

The key test is whether or not membership entitlements are provided in return for the payments. If these payments constitute consideration for membership supplies they are subscriptions irrespective of how they are described. Subscriptions will generally be paid periodically to secure membership for a set time but this is not invariably the case.

A one-off payment is still capable of being regarded as a subscription. Many organisations offer life membership in return for a single payment. Nor does a payment cease to be a subscription simply because, after receiving it from the members, the body applies it to some charitable purpose. The final destination of the income does not prevent it having previously been consideration for membership supplies.

Other consideration

Section 94(2)(a) VAT Act 1994 was intended to be wide ranging. The phrase ‘other consideration’ was included to bring forms of payment within the scope of the provision that might otherwise have escaped if a strict interpretation of subscription had been applied. It therefore operates as an anti-avoidance measure.

Anything that is normally capable of being consideration (both monetary and non- monetary) can be other consideration under section 94(2)(a). It is important to distinguish between cases where the consideration for the membership supplies is monetary and those where it is wholly or partially non-monetary.

Monetary consideration cases are not only those where there is a subscription, levy, or joining fee. They also include cases where the member pays for a package of a share or debenture plus membership supplies. Here the total paid must be apportioned under section 19(4) of the VAT Act 1994 to reflect the values of the exempt security and standard- rated membership supplies.

Non-monetary consideration cases are those where, for example, the act of making a loan or purchasing a share or debenture is a necessary requirement for membership benefits to be supplied. Non-monetary consideration is valued under section 19(3) of the VAT Act 1994.

Many sporting services supplied by clubs to their members are exempt. The consideration other than the subscription will be exempt income where these services qualify for exemption.

You should establish when the consideration is for exempt supplies and when it is for standard-rated supplies. The liability depends upon whether or not the body is non-profit making and the status of the member providing the consideration.

Sporting services supplied by profit-making, proprietary and commercial clubs are standard-rated. The other consideration will be taxable like the subscriptions.

Sporting services supplied to playing members of non-profit making clubs will normally be exempt and their subscriptions will not be taxable, nor will any other consideration that they have to provide.

Other consideration provided by social or other non-playing members of non-profit making clubs will be standard-rated along with the subscriptions paid by this category of member. This is because they do not relate to the provision of exempt sporting services. It is possible that a club will have these members in addition to playing members so there could be a mixture of exempt and taxable other consideration.

Full details of this exemption may be found in VSPORT Sport.

Joining fees and levies

A joining fee is an initial payment that a member has to make in addition to any subscription before they are entitled to receive the benefits of membership. The joining fee will have the same liability as the subscription itself.

Levies are normally demanded from existing members when a body requires additional funds. Where a levy has been raised and the benefits to members remain unaltered the levy will have the same liability as the existing subscription.

However, sometimes there is a change to the continuing benefits supplied. An example of this would be where a zero-rated benefit is introduced when all the previous benefits were standard-rated. When this happens the subscriptions from that time on will need to be apportioned to reflect the new liabilities. The levy follows the liability of the newly apportioned subscription.

A levy may also be used to fund a one-off supply to the members rather than a continuing benefit. For example, on its centenary a club might impose a levy to fund the production of a commemorative book to be supplied to members at no further charge. The liability of this levy would be determined by the liability of the book, irrespective of the subscription’s liability.

Non-monetary consideration

Consideration can be given for membership supplies in forms other than money. For example, the act of making a loan or purchasing a share or debenture may be a necessary requirement for the membership benefits to be supplied and may therefore constitute other consideration.

Examples of non-monetary consideration are:

  • where members or potential members have to make an interest-free loan to the body;
  • where members or potential members have to make a loan and are then paid interest at a rate lower than the prevailing commercial rate;
  • where members have to lend a specified sum to the club which is only repaid upon cessation of membership;
  • where members voluntarily make an interest-free loan but in return get preferential treatment when compared to non-members or members that have not made loans.

The decision in Exeter Golf and Country Club Ltd is important in establishing the general principles applying to non-monetary consideration. See VBNB75920 for more on this case.

If you find that non-monetary consideration has been given you need to work out what value should be applied to it. In non-monetary consideration cases the value is determined not by the amount loaned or given but by the value of the act of making that loan.

See paragraph 7.4 of V1-12 Valuation for further guidance on non-monetary consideration, including methods for valuing the non-monetary consideration.

Donational elements within a subscription

A subscription can contain a donation.

In strict legal terms whenever a body provides benefits the subscription is wholly taxable. However, the subscription is subject to apportionment where any zero-rated or exempt benefits are supplied. This view was confirmed by the Court of Session in the case of Tron Theatre Ltd. See VBNB75920.

There are two basic conditions that must be satisfied before a donational element will be recognised:

  • the body must be of a charitable nature, so that persons are likely to wish to make donations to it; and
  • the benefits received must also be obtainable by non-members.

(a) The nature of the body

The body does not have to be a registered charity before HMRC will accept that subscriptions to it have a donational element. However, its activities should be directed towards benefiting the general public, or a particular sector of the public, rather than its own members.

(b) Non-exclusive benefits

You can only treat part of a subscription as a voluntary payment or donation if either:

  • all the substantive benefits provided are available to non-members at no charge or more cheaply than the subscription (you should ignore any nominal benefits); or
  • some or all of the substantive benefits are exclusive to members and you can show that the amount paid is more than the subscriber would normally have to pay for similar goods or services.

Priority booking rights

Members of bodies which support theatres often enjoy priority booking rights for performances. If this is the case, no part of the subscription can be a donation. The subscription should be treated in the same way as non-exclusive benefits with any residual part allocated to the priority booking right.

Organisations may argue that:

  • the priority booking right has no value;
  • the right only has a value when it enables a member to book for an event or performance that will be highly popular or oversubscribed.

HMRC will not normally accept either of these arguments. Firstly, we are concerned with whether there has been a supply for which consideration was provided, not whether the supply can be regarded as worth the consideration that was given.

In this case, the priority booking right has been supplied. The consideration given is what remains of the subscription after all the other elements have been allocated. Hypothetical value is not the test by which a supply is identified in the first place.

The question of whether an event is likely to be fully attended, partially attended or not attended at all has no relevance to whether or not members of a body have obtained a right to secure their own attendance in preference to non-members.

Discounted admissions

Many charitable bodies, for example wildlife and heritage trusts, provide free or discounted admission for members to their reserves and sites. This is often the only or main benefit to members. So it is necessary to place a value on it for the purposes of determining the extent of the donational element of the subscription.

Paragraph 7.4 of V1-12 Valuation gives you full guidance on the approved method for valuing this benefit.

Consideration not provided to the supplier of the benefits

A common arrangement is for a club and company to be separately constituted. The company may own property which it then leases to the club for the purpose of supplying the membership facilities. The club will often require members to buy shares in, or make loans to, the company but will provide the benefits to the members itself.

The club may argue that the financial transaction between the company and each member is:

  • unrelated to the supply of benefits by itself; and
  • cannot therefore form any part of the consideration that it has received.

However, in reality there will often be a link between the provision of money to the company and the consequent supplies to the member from the club. The club cannot provide the benefits without the company’s support. That support cannot be given if the company lacks sufficient finances.

There is clear precedent for HMRC’s view that entering into the financial arrangement with a third party can constitute consideration for the supplies made by the club to its members. See Largs Golf Club and Blackmoor Golf Club at VBNB75920.

Therefore, HMRC will not normally accept that a share-purchase, bond-purchase or debenture-purchase from an associated company, or the making of a loan to it, is independent from the transaction in which membership supplies are made.