VAT on membership subscriptions
HMRC have issued a new brief which concerns claims for overpaid VAT from certain non-profit bodies.
There is an Extra Statutory Concession (ESC) which allows non-profit making membership bodies who supply one single package of benefits to members to apportion subscriptions. This ESC allows these bodies to look at each element of the benefits package and apportion VAT accordingly. This concession is not allowed for other types of business.
The ESC works by allowing the charity to charge a lower rate of VAT on a membership subscription which would usually be at the standard rate. This is done by apportioning for zero-rated or VAT exempt elements.
The brief issued by HMRC has been targeted at certain non-profit bodies who have made retrospective claims for “overpaid” VAT. HMRC have confirmed that they will reject any such claims made using the ESC.
Valid claims will be given due consideration by HMRC where they are based on current VAT law (as opposed to the use of the ESC).