26 January 2018
HMRC have announced that the concession which enables clubs to treat affiliation fees as exempt for value-added tax (VAT) purposes will be withdrawn in the UK from 1 April 2018.
Sports clubs often charge an affiliation fee to individual clubs who make an onward charge to their members. An example of this would be where a football team hires pitch space from a club and the football team charge their players for training time. Where the clubs operate on a not-for-profit basis, 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.
The idea of this concession is to ensure that profit-making commercial clubs are in a similar position to non-profit-making clubs. This works by allowing profit-making commercial clubs to treat these re-charges to their members as though they were disbursements for VAT purposes.
HMRC’s view on this is that such re-charges of affiliation fees aren't disbursements and that the concession goes above and beyond the tax agency's discretion. As a result of this, the concession is therefore being withdrawn.
The withdrawal of the concession means that the onward charge by profit-making clubs of the affiliation fee will be liable to VAT at 20% unless it meets the conditions of a genuine disbursement.
There is good news for not-for-profit making clubs and similar bodies in that the removal of this concession will not affect them. Their affiliation fees will continue to be exempt from VAT. If the clubs are partly exempt they should ensure that they continue to include affiliation fees in their exempt and total supplies when calculating the percentage of recoverable input tax.