The is a long series of Appeals concerning this VAT exemption. It is a complex issue. Some such organisations fall into the error of thinking that their membership subscriptions are automatically exempt from VAT. Of course, if HMRC rule against this, the resulting assessment can be substantial.
The European legislation (PVD, art 132 (1)(l)) provides exemption for: “the supply of services, and the supply of goods closely linked thereto, to their members in their common interest in a return for a subscription fixed in accordance with their rules by non-profit making organizations with aims of a political, trade union, religious, patriotic, philosophical, philanthropic or civic nature, provided that this exemption is not likely to cause distortion of competition; …..”
In the UK. VAT Act 1994, Sch 9, Group 9 divides this into five sub-categories.
Item No. 1
The supply to its members of such services and, in connection with those services, of such goods as are both referable only to its aims and available without payment other than a membership subscription by any of the following non-profit-making organisations -
(a) a trade union or other organisation of persons having as its main object the negotiation on behalf of its members of the terms and conditions of their employment;
(b) a professional association, membership of which is wholly or mainly restricted to individuals who have or are seeking a qualification appropriate to the practice of the profession concerned;
(c) an association, the primary purpose of which is the advancement of a particular branch of knowledge, or the fostering of professional expertise, connected with the past or present professions or employments of its members; [To which Note 4 adds: “(4) Paragraph (c) does not apply unless the association restricts its membership wholly or mainly to individuals whose present or previous professions or employments are directly connected with the purposes of the association.”]
(d) an association, the primary purpose of which is to make representations to the Government on legislation and other public matters which affect the business or professional interests of its members;
(e) a body which has objects which are in the public domain and are of a political, religious, patriotic, philosophical, philanthropic or civic nature.”
An organisation seeking to ensure its supplies do fall within this exemption should review its Articles of Association, Mission Statement, web site and other publicity. The terms of membership, benefits of membership, etc. must also be consistent. One danger can be that these matters can evolve over time, leading to the organisation drifting from the conditions for exemption. A periodic review might be worth considering.
About Les Howard
Hi, I am a VAT Consultant, working mainly with charities. I am based in Cambridgeshire
I have over 20 years experience in VAT, and am currently also a part-time member of the Tax Tribunals.