Potential Boost for VAT registered clubs

by RYA on 3 Apr 2009 A recent decision of the European Court of Justice has indicated that there may now be an opportunity for VAT registered clubs and associations set up to operate on a non-profit making basis to reclaim VAT paid to HM Revenue & Customs ('HMRC') on fees charged to non-members, although the English Courts have yet formally to adopt this ruling.

To date, HMRC had permitted certain non-profit making members’ clubs and associations to treat the membership fees of individuals as exempt from VAT. However, fees levied to non-members (e.g. pay and sail) have been subject to the standard rate of VAT, as have group or corporate membership subscriptions, although for many clubs the amount of such fees is so low that the club does not need to register for or charge VAT.

However, the European Court of Justice has now held that HMRC should not apply a different rate of VAT to what effectively amounts to the same pursuit - i.e. the provision of 'services closely linked and essential to sport' - according to the status of the recipient.

This means that some fees levied by VAT-registered clubs may not now be subject to VAT, although there might also be a corresponding reduction in the input tax that the club is able to recover.

VAT registered clubs may be eligible to submit claims for VAT paid on such fees in the past three years. There is also a brief opportunity for VAT registered clubs to submit claims for VAT as far back as January 1990 (when the exemption for individual memberships was originally introduced) provided that those submissions arrive with HMRC at the latest by 31 March 2009.

We would therefore strongly recommend that VAT registered clubs contact their accountants as soon as possible to seek advice as to whether they might be able to benefit from the European Court’s decision.

For further information contact the RYA Legal Department.