Taxman demands VAT from gyms

The situation is different where the leisure centre charges different fees for different services. So where a visitor to a leisure centre is charged based on what services he uses, then the exact VAT position of the service can be taken into account. So let's take as an example a customer who does not pay a membership fee, but is instead charged based on what he uses in the gym. If he avails himself of, say, the swimming tuition, there will be no VAT to pay, as that would be exempt. If, on the other hand, he used the sauna, then VAT would be payable.

Contrast that with a member who pays an annual fee. The court's view was that his fee is a single supply, amounting to a right to exercise and enjoy the use of the facilities as and when and to whatever extent required. As the member can use whatever he likes, it is not possible to know at the outset whether he would use only VAT exempt services, VATable services, or a mixture of both. The membership fee is therefore subject to VAT at the standard rate (17.5 per cent).

However, if the fee entitles the member to use services, all of which would have been exempt if he had paid for them individually, then the taxman accepts that there is no need to charge VAT on the fee.

Click here to read the taxman's statement on the court case.

This judgment was given in May, but the case has just come back again into the news. The Telegraph today reports on the judgment, against the backdrop that the taxman's determination to collect the VAT (has he any choice?) undermines the Government's stated aim of getting us all fit and healthy.