HMRC has given notice of the withdrawal of its extra statutory concession (ESC) on VAT and affiliation fees for sports clubs, currently published as paragraph 3.6.2 of VAT Notice 701/45.
“A sport’s governing body, or similar umbrella organisation, 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.
The concession seeks to put profit-making commercial clubs in a similar position to non-profit making clubs, in that they do not need to account for output tax on the fee charged. It achieves this by allowing profit-making commercial clubs to treat these re-charges to their members as though they were disbursements. However, as such re-charges of affiliation fees are not legally a disbursement the concession goes beyond HMRC’s discretion and it will be withdrawn with effect from April 2018.
Withdrawal of the concession means that the onward charge of the affiliation fee will be liable to VAT unless it meets the conditions of a disbursement.
The withdrawal of this concession has no impact on the VAT treatment of affiliation fees by non-profit making sports governing bodies, or similar umbrella organisations, and on non-profit making sports clubs to their members. In their case, the charge they make of affiliation fees continue to be exempt under the law.”
Tax Barrister, Accountant