A number of charities benefit from the Extra Statutory Concession for non-profit membership bodies whereby the package can be apportioned to reflect the underlying VAT treatment of the specific benefits.  This in turn is useful where a benefit is printed material which is generically zero rated, and which allows for a reduction in the VAT on the subscription, or, where the benefits would otherwise be exempt, increases VAT recovery on costs.

This ‘concession’ has recently come under pressure in the Serpentine Gallery tribunal decision where the tribunal asserted that supporters were not members, and that the basket of supplies they received were a single (or ‘composite’) standard rated supply of ‘association’ with the Gallery.

But we now have a glimmer of hope for charities who operate membership supplies without that level of member involvement and whose use of the ESC may be regarded as frail. Harley Davidson won a recent case, on the basis that the package of benefits arising from payment of a membership fee could be treated as a multiple (or ‘mixed’) supply where every element is afforded its own VAT treatment. The case considered whether under the law (not by concession) their membership subscription was apportionable to reflect different liabilities such as printed magazines.

Many charities may be much closer to Harley than to Serpentine.  Unless HMRC appeals successfully, charities may well be able to assert that they need not rely on the ESC as the supply can be apportioned as a matter of VAT law.  This is an important case, and we will monitor any developments with fascination.