Payroll and PAYE

Taxation of Club Checks


Free Drinks for Members

No Income Tax is due on free drinks to members for attending the Annual General Meeting, Annual Dinner etc.

Drinks to Committee Members – “Duty Drinks”

Club’s are not normally liable to pay tax to the H M Revenue & Customs in respect of free drinks provided to committee members. However, clubs need to be aware of the non cash voucher legislation under which H M Revenue & Customs have raised assessments on a number of clubs.

A non cash voucher is defined as “any voucher, stamp or similar document or token capable of being exchanged for money goods or services”. H M Revenue & Customs have on occasions assessed clubs on the face value of each check, the face value being the retail price of the drink for which the check may be exchanged. However, such assessments on the selling price were incorrect and after appeal have subsequently been reduced. The voucher legislation states that the measure of the taxable benefit is the expense incurred by the club in providing the benefit. The cost to the club in beer and other purchases in providing a £1 check is considerably less than £1. For purposes of this legislation cost includes VAT.

A club should always prohibit the sale by committeemen of their checks to other members or visitors. This is because the sale would increase the taxable benefit from the cost to the club to its face value.

Procedures to Reduce Liabilities

It is only free drinks given for duties, eg committee, doormen etc that is under attack. If however, beer and other drinks are provided to committeemen without them having to provide anything to bar staff, the voucher legislation will not apply. A major problem with such a scheme is ensuring the maintenance of bar controls. Any scheme where no vouchers are provided to obtain free beer is potentially open to abuse and financial loss to the club may result if the scheme is not carefully monitored.

For there to be no income tax liability no voucher or anything which can be construed as a voucher is passed over the bar in exchange for the drink. The following procedures are suggested:-

1. A record be maintained by the secretary in a “Free Drinks Book – There should be no reference at all to checks, vouchers etc and none should be given out for duties.

2. A duplicate of the “Free Drinks Book” as far as it refers to “duty” free drinks should be kept behind the bar.

3. Each time a committee member, doorman etc receives a drink a record should be made in the “Free Drinks Book” – by the bar staff marking it with a tick or other symbol confirming the transaction.

4. The two books should be reconciled each week.

5. The steward should be given a separate stock-sheet allowance for “Free Drinks” this should be separately identified by the stock taker on his report to each reconciliation with the secretary’s record.

6. Free drinks given other than for duties eg, prize winners, AGM’s etc can still be controlled by the voucher/check system.

7. Often the only committee drinks given by the clubs are for attendance at committee meetings. No liability arises if the drinks are brought to the committee or collected by committee members at the start and end of the meeting without the exchange of checks.

It cannot be confirmed absolutely that this method will not be attacked in due course. It does appear to be effective at present.

Other Procedures

A club may continue to issue duty checks and minimise liability by ensuring PAYE procedures are correctly followed by obtaining signed P46’s from committeemen. No income tax is due if a committeeman has unused personal tax allowances to absorb any potential tax liability.

Provided each recipient earnings from the club is less than the lower national insurance threshold no national insurance is due on duty checks.

Value Added Tax and club checks

Free Drinks for Members when attending the Annual General Meeting, Annual Dinner etc.
Free drinks provided to subscribing members in circumstances such as these, do not constitute business entertainment because, in effect, they are paid for from subscriptions. This means that no (further) tax is due when these drinks are provided free, but tax is – of course – due on any money paid if the drinks are given at a reduced price. VAT incurred on such supplies may be reclaimed.

Drinks to Committee Member – “Duty Drinks”

Tax is due on the normal selling price of the drinks – entitlement to input is not restricted.
When drinks are given to committee members who are carrying out certain duties, there is a barter situation with committee members’ services forming non monetary consideration for the drinks. Thus even if there is no income tax liability, VAT will still be due.