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HMRC internal manual

VAT Business/Non-Business Manual

HM Revenue & Customs
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Clubs and associations: have facilities or advantages been granted to members?

Facilities and advantages

Section 94(2)(a) of the VAT Act 1994 uses the phrase ‘facilities or advantages’. There is very little authority interpreting those terms.

Tribunals have considered the word facilities to have its normal everyday meaning, which is the means or opportunities to do something more easily. Therefore HMRC considers facilities to be those things provided by a club that enable its members to pursue those activities or interests for which they have come together.

Advantages have been considered by the Court of Appeal which upheld the decision in British Field Sports Society (see VBNB75940). See also the common law case of Strange v Pettifor at VBNB75940.

HMRC therefore interprets advantages as meaning those things that:

  • members receive in return for a subscription; and
  • are not available to non-members.

This also extends to things that are supplied on more favourable terms to members than non-members. Such things may include the right to obtain admission at reduced rates or the obtaining of discounts on specified goods.

Distinguishing facilities and advantages from minimal rights

It may be argued that what a body provides to its members is not enough to be considered a benefit. Often this can be said when a body hands over some of its income to the charities or institutions that it supports. The body may say that members’ subscriptions are simply regular donations to these causes.

However, what the body may see as ‘negligible’ or ‘worthless’ benefits (priority booking rights being a common example) still constitute facilities or advantages when they are not available to non- members.

Whether these things are apparently worth less than the subscription is not the issue. Whether someone gets value for money is not the same question as whether or not supplies have been made in return for a consideration.

Lapsed membership

Sometimes members may arrange for payment of their subscriptions by standing order or direct debit. The question which then arises is whether the body still has to account for VAT on subscriptions received this way after members have lost contact with it.

The need to account for VAT depends upon whether or not the membership can be said to have lapsed. If the member has retained an entitlement to obtain benefits, for example:

  • newsletters are still being sent to their last known address; and
  • they would be permitted to attend any meetings or activities if they reappeared

the subscriptions will remain taxable.

However, if:

  • the right to membership benefits has been stopped;
  • no benefits are being supplied; and
  • the body has clearly said that it has withdrawn the membership, for example by sending a letter of such intent to the member’s last known address

HMRC will normally accept that the subscriptions no longer represent consideration for any supplies and are outside the scope of VAT.