VAT And Sporting Clubs
This article deals with the affect of VAT on members non profit making sports clubs; it is intended as a general guide only, professional advice should be obtained on specific matters. H M Revenue & Customs regards these clubs as a business even if they were not set out to make a profit in the commercial sense.
VAT registration is compulsory when a club’s taxable income (standard and zero rated) in the preceding twelve months, or the expected income in the next thirty days exceeds the VAT registration threshold. In calculating income all the sections of the club need to be taken into account, unless the sections have their own constitution, and it can be shown they are financed and managed independently. Once the club is liable to register for VAT it should notify H M Revenue & Customs immediately as there are penalties for late registration.
The rules exempt from VAT services closely linked and essential to sport and physical education; VAT is not charged on playing members subscriptions and services and equipment hired to members. These VAT exempt activities together with other exempt activities of a club will make it partially exempt and could result in restrictions on claiming input VAT on purchases made. Particular attention will be needed where the club is planning major capital expenditure on sporting facilities.
INCOME
All the income of the club needs to be identified and the VAT treatment examined. The lists below are for guidance only:-
Standard rated
Zero rated – VAT liable at 0%
Exempt – not taxable but may affect ability to recover VAT on expenditure:
Exempt but option to tax available:
Outside scope of VAT – No VAT is chargeable.
Sponsorship is subject to VAT where clearly identifiable benefits are received, e.g. wearing a product name on a team shirt. To maximise the cash retained by the club it is worth determining at the start of the agreement exactly what is being provided. This is especially so where the sponsor does not recover all VAT; the agreement may contain an element of donation or a payment for perimeter advertising. Where the sponsor recovers all VAT suffered, the VAT paid by the club will be recoverable by the sponsor, the club will be required to issue a valid VAT invoice.
Advertising in a club programme, magazine or notice board is standard rated; letting of an advertising hoarding at a sports ground or perimeter fence is exempt.
Donations where the donor receives no benefit in return are outside the scope of VAT, this is so even if the person making the donation has a say in how the money is spent. The donation must be freely given.
Subscriptions may be apportioned between various supplies, for example, Vice Presidents subscriptions may contain an element of donation, payment for magazine (zero rated) and social membership (standard rated). In certain circumstances it may be advisable to obtain a written ruling from Customs & Excise.
Shop sales may contain a mixture of standard rated and zero rated goods. If the required tilling analysis is not produced at the point of sale it may be necessary to agree a retail scheme with H M Revenue & Customs.
LAND AND BUILDINGS
This is a complex areas and it is advisable to obtain specific professional advice.
Option to tax –It is possible to opt to charge VAT on commercial lettings which would otherwise be exempt. The advantage of opting to tax is that connected input tax which would not be recoverable if the supply was exempt can be recovered. This election is irrevocable.
Exempt income – The extension of exemption for sporting club income may result in the restriction in the recovery of VAT on major new sports building projects.
Self-supply – on new work, self storage and certain extensions. A self-supply charge can arise on land used for development, if the club has significant exempt income additional VAT may become payable.
PLANNING POINTS
To minimise the VAT burden on sports clubs careful planning is required:
Registration:
Outputs:
Inputs:
Exempt supplies:
Accounting record: