Contrary to the tax office’s interpretation of how VAT should work with charities supplying benefits to their members, a tax tribunal has ruled in favour of the Harley Davidson owners group that each element of its membership benefits can be given its own VAT treatment.

The Harley case looked at the issue of whether the membership subscription could be apportionable to reflect different liabilities, such as printed magazines.

Harley won the case on the basis that the package of benefits arising from payment of the membership fee could be treated as a multiple (or ‘mixed’) supply where every element is afforded its own VAT treatment.

Broadly, the reason was that it was possible for members to enjoy each benefit entirely separately, and without any over-arching unity between them.

Some members valued the VAT zero-rated magazine, whereas others liked the meetings, and others liked the available merchandise, and others went on holidays reserved for members, etc.

Whilst some members enjoyed all the benefits from being in the club, they didn’t have to.  It could be differentiated from the Serpentine Gallery case, where the elements combined to create a sense of association for its ‘members’ with the Gallery.  In the Harley case, each element was separate, even though the overall intention was to engender a sense of involvement and loyalty.

Many charities may feel they are closer to Harley than Serpentine, so unless HM Revenue & Customs successfully appeal, charities may be able to argue that their supply of benefits can be apportioned under VAT legislation.

If you would like to discuss the VAT treatment of your membership benefits, please contact our Charities Team.


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