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HMRC To Withdraw VAT Relief For Sporting Associations

by Jason Gorringe,, London

22 January 2018

HM Revenue and Customs (HMRC) has announced that the concession enabling clubs to treat affiliation fees as exempt for value-added tax purposes will be withdrawn in the UK from April 1, 2018.

A sport's governing body, or similar umbrella organization, often charges an affiliation fee to individual clubs who make an onward charge to their members. Where the clubs are non-profit making, the supply of this affiliation fee to their individual members is exempt from VAT. However, if the club is a profit-making commercial club, then the supply to their individual member is standard rated.

Presently the UK offers a concession that is intended to place profit-making commercial clubs in a similar position to non-profit-making clubs, so that they don't need to account for output tax on the fee charged. This is achieved by allowing profit-making commercial clubs to treat these re-charges to their members as though they were disbursements, HMRC explained.

According to HMRC, as such re-charges of affiliation fees aren't legally disbursements, the concession goes beyond the tax agency's discretion and is therefore being withdrawn with effect from April 1, 2018.

Withdrawal of the concession means that the onward charge of the affiliation fee will be liable to VAT at the standard rate of 20 percent, unless it meets the conditions of a disbursement. A full explanation of those conditions can be found in paragraph 25.1.1 of Notice No 700.

The withdrawal of the concession has no impact on the VAT treatment of affiliation fees by non-profit-making sports governing bodies, or similar umbrella organizations, and on non-profit-making sports clubs to their members. In their case, the charge they make for affiliation fees will continue to be exempt under the law. If they are partly exempt for the purposes of calculating their recoverable input tax, such bodies should ensure that they continue to include affiliation fees in their exempt and total supplies in any appropriate partial exemption calculation, HMRC said.

TAGS: compliance | VAT tax authority guidance | tax | value added tax (VAT) | VAT legislation | law | United Kingdom | fees | tax authority | legislation | services | VAT goods & services classification | VAT compliance matters

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