Following the recent case of Canterbury Hockey Club and Canterbury Ladies Hockey Club, H M Revenue and Customs has changed the VAT treatment of affiliation fees charged by sports governing bodies to member clubs. Other essential sports related supplies provided by non-profit making organisations may also be affected.

Previously, certain charges supplied to corporate bodies or unincorporated associations were subject to VAT. However the latest development confirms that these charges should always have been treated as VAT exempt.

As a result of this development, eligible bodies have overpaid output tax. Whilst there is no requirement to adjust previous income, if it is considered beneficial a retrospective claim can be made. However, this change will lead to input tax recovery consequences. 

As you are no doubt aware VAT recovery is based on future taxable supplies being made.  Therefore where input VAT has been incurred and recovered in respect of this income, any potential claim may be reduced by the need to repay the previously recovered input VAT.

Any claims made will be subject to the four year capping rule.

The UK law will change from 1 September 2010 to state that eligible bodies, i.e non-profit making and those not subject to commercial influence, must exempt supplies where the true beneficiaries are persons taking part in sport.

Customers of these eligible bodies who, up until 31 August 2010, continue to be charged VAT should consider communicating with the body to ascertain whether this is appropriate.

If this affects you or you need any further information then please contact the VAT team at vat@menzies.co.uk.