Value added tax

VAT is charged on the supply of goods and services in the UK in the course of furtherance of a business, and on the Importation of goods into the UK whether or not for business purposes.

The provision by a club or association of the facilities or advantages available to its members in return for a subscription or other consideration is deemed to be the carrying on of a business. Also the admission, for a consideration, of persons to any premises by such an organisation is deemed to be the carrying on of a business.

VAT is charged on the supply of goods and services in the UK if it is a taxable supply and is made by a taxable person. A taxable person is one who is or should be registered for VAT purposes. An association or club which is treated as carrying on a business and makes taxable supplies is required to register for VAT purposes if the value of those supplies exceeds 67,000 in any 12 month period/ registration is usually backdated in the case of failure to register and VAT is payable whether or not it has been charged to members or customers.

It is the joint and several responsibility of the chairman (or commodore) Secretary and Treasurer of an association or club to notify HM customs and excise of liability to register for VAT. This must be done on the official form at the beginning of the year in which taxable supplies are expected to exceed 67,000.

All taxable supplies must be aggregated to determine whether the registration threshold has been reached.

The 1990 6th EC Directive on VAT, although not complied with by the UK VAT authorities until 1994, has made a substantial difference to the VAT liability of many medium sized sports clubs. The Directive provides that the supply of services to persons taking part in sport or physical recreation and closely related to sport and recreation by non profit making organisations shall be VAT exempt. Full details are contained in VAT notice 701/45/94 sport and physical recreation. In 1994 a number of clubs received a substantial refund of VAT as a result of a campaign waged by the Central Council of Physical Recreation, and supported by the RYA, for the UK Treasury to comply with the terms of the 6th Directive. After extended discussions the Treasury did agree to comply, and refunds to clubs were backdated to January 1990.

Following the refund uncertainty arose as to whether the refunded VAT could be retained by the club, or should be reimbursed to the members individually. The CCPR took the opinion of leading counsel, and was advised that there is no legal requirement to repay the money and therefore it could be kept for the benefit of the club as a whole.

For RYA affiliated clubs providing moorings for members the campaign for VAT exemption was originally only partially successful. HM Customs and Excise refused to accept that the provision of moorings by a club ( or any other non profit making organisation) was a supply closely related to the provision of services for sport and recreation although they inconsistently allowed the exemption in the case of golf club lockers. The RYA's argument that a mooring for a yacht not actually being used served the same purpose as a locker for golf equipment not being used was not accepted by the Commissioners. In 1995 the RYA supported the appeal of the Swansea Yacht and Sub Aqua Club to the VAT Tribunal (LON/95/2546 No. 13938). The Commissioners argued that moorings were only used for the storage of boats while a person was not 'taking part in sport' and therefore fell outside the scope of the Sixth Directive. The Tribunal dismissed this interpretation as 'extraordinary' and held that the natural meaning of the words encompass the times when a boat is not being actively used as well as when it is being so used. As a result of this case all moorings supplied to members by clubs are now VAT exempt.

Unfortunately for those on moorings supplied by local authorities, Note (3) (a) to Group 10 of Schedule 9 of the VAT Act 1994 specifically excludes local authorities from the definition of 'non profit making bodies', so the exemption is of no help to them.

Further information is available on the website of HM Revenue & Customs - see Related Links above.

If you require further assistance please do not hesitate to contact the Legal Department Tel: 0845 3450373 Email: legal@rya.org.uk.