Unwary sports clubs face millennium VAT pitfall

New rules, which came into action on January 1, have been issued by Customs & Excise which may oblige unwary sports club organisers to charge and pay VAT.

The aim is to distinguish sports clubs which are run for commercial gain from those which are organised by members for their own entertainment. But mutual clubs could be included inside the remit of the new rules, alongside profit-led ventures, if organisers do not act now to meet the new Customs & Excise guidance.

Chas Roy-Chowdhury, secretary to ACCA’s taxation committee, warned:’The new rules are designed to bring clubs which are run for commercial purposes within the scope of VAT. Customs has laid out specific exemptions so that mutual clubs can escape the provisions of being taxed. However, mutual club organisers will need to understand the changes. If they do not, VAT will be levied on member subscriptions or on services provided by the club.’

He said that clubs will need to ensure their constitutions specifically state that they are non-profit making establishments and that any profits realised can only be distributed on dissolution.

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