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.
The free seminar will be in London and is likely to be either a breakfast (8.30-10.30) or early evening (17.00-19.00) session. Please register your interest and indicate any time preferences by e-mail to [email protected]. We will then aim to confirm a date shortly.
We would welcome feedback and questions on the updated guidance from members and will also be providing further detailed written commentary shortly.
Charity and Observer Members are reminded that their membership is on an organisational basis and that there is no limit of the number of subscribers to the website per organisation. If you think a colleague would benefit from getting access to the website and newsletters directly, please encourage them to register online at www.charitytaxgroup.org.uk/join-us/ selecting your organisation from the drop-down box.
CTG continues its efforts to expand the number of charity members and would be very grateful if you could share details of membership with any charity sector contacts. Further information and a link to a downloadable promotional leaflet can be found here.