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HMRC internal manual

VAT Business/Non-Business Manual

HM Revenue & Customs
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Clubs and associations: buying organisations’ subscription income

Companies or associations may sometimes be set up to assist other companies within a particular trade by providing discounted goods or a ‘purchasing service’ for their members.

The two most common versions are:

  • a company that buys in goods in bulk itself so that it can then supply these on to its own members at a discount;
  • a company that arranges to purchase goods from other companies, so obtaining a discount. It will then pay for these goods on its members’ behalf and the members will then reimburse the company or pay a slightly higher price to the company for the goods.

The members will normally be required to buy shares in, make a loan to, or pay a levy to the company providing the ‘discount service’.

Buying organisations like this fulfil the three basic requirements for treatment as a deemed business body under section 94(2)(a) of the VAT Act (see VBNB60410).

The company can be regarded as an organisation. The share, loan, or levy requirement constitutes other consideration. The advantages gained by the members are the right to obtain goods at a discounted rate.