A client is a limited company and runs a gym. They use a collections agency to collect memberships.
The collections agency sent them this message regarding the membership fees cleints are paying whilst gym has shut:
"VAT exemption – For gyms still receiving payments from members, these may be considered donations and as such would not be subject to VAT. We recommend speaking to your accountant about whether this applies to your situation."
Is this a reasonable point of view? He obviously is not carrying out a trade at the moment and is not doing zoom classes etc. His gym is properly shut.
Related resources
Replies (8)
Please login or register to join the discussion.
I somehow doubt it unless the customers are actively donating these sums with intent that they are donations.
See here re football clubs, season ticket refunds,vat and donations which whilst not the same re payment pattern may give you some relevant points to consider.
https://www.accountingweb.co.uk/any-answers/vat-on-unclaimed-season-tick...
If the gym is shut, why are they seeking to collect fees? The contract has clearly been frustrated and the gym owner is no longer entitled to payment. There indeed is an argument that the frustration terminates - rather than merely suspends - the membership contract.
A large proportion of the clients have cancelled their memberships but the ones that are still paying have said that they want to as it will help keep they gym open. So I was of the opinion that it wasn't strictly a donation because the payments are being made in the hope that there is a future service provided.
A large proportion of the clients have cancelled their memberships but the ones that are still paying have said that they want to as it will help keep they gym open. So I was of the opinion that it wasn't strictly a donation because the payments are being made in the hope that there is a future service provided.
I would expect, as highlighted in the thread DJKL linked, that the absolute minimum that would be needed to even entertain such an idea is for the members to have been contacted and offered a refund of payments made while closed or can the gym keep them as a donation.
Your client would also need to take care to ensure that nothing is provided in return for allowing the gym to keep the payments so that it can be demonstrated that no supply is made. For example, my gym emailed me to say that they will not collect payments by default but if I was to continue paying while closed I would get some benefits when they re-opened. Clearly in that case a supply would be being made.
That’s exactly what many gyms - including mine, which is run by a large charitable body - have done.
They have told us all that memberships will be suspended and no DDs taken, but that they do have ongoing costs, are losing out on £8m a month of income, and if we would like to keep paying voluntarily we should contact them to arrange for the DD to continue.
I imagine it’s fairly common in the sector, particularly in cases where community sporting provision is maintained with a not-for-profit motive
