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HMRC internal manual

VAT Trade Unions and Professional Bodies

HM Revenue & Customs
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Trade unions and professional bodies: Item 1(b) professional associations: Restriction to individuals

To qualify for exemption under “Item 1(b)”, the association must restrict its membership “wholly or mainly” to “individuals” who “have or are seeking” qualifications “appropriate to the practice of the profession concerned”.

There is no tribunal or court precedent for what proportion of the membership satisfies the “wholly or mainly” criterion. However, our policy is to interpret the phrase as being significantly nearer 100% than 50% of the membership; and we regard any association with a membership comprising 75% or more individuals as satisfying the criterion.

Professional firms that are partnerships can be regarded as “individuals” for the purposes of “Item 1(b)”.

When considering whether an association restricts its membership, you should look at what is happening in practice. Therefore, an association that purports to restrict its membership in its constitution or rules, but does not actually impose the restriction, will not satisfy this criterion. Conversely, an association that does not specifically claim to restrict the membership in its rules or constitution, but in reality does impose a restriction, could meet the criterion provided the number of individuals comprise 75% or more of the membership.

  • However, following the ECJ decision in the Institute of the Motor Industry (referred to in VTUPB1200) HMRC now accepts that membership need not be mainly restricted to individuals.