Exemption ― sport and physical recreation

Produced by Tolley
Exemption ― sport and physical recreation

The following Value Added Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Exemption ― sport and physical recreation
  • What does the VAT exemption include?
  • What is an eligible body?
  • When is an organisation non-profit making?
  • Commercial influence
  • Commercial influence
  • Exempt sporting activities
  • Exempt sports and physical recreation
  • Services closely linked and essential to sport or physical recreation
  • Individuals
  • More...

This guidance note provides an overview of the main VAT rules relating to supplies of sport and physical recreation.

What does the VAT exemption include?

The VAT exemption covers:

  1. the provision of sport and physical recreation by an eligible body

  2. entry to eligible sport and physical recreation competitions (see the Exemption ― sport ― VAT treatment of various sporting services guidance note)

What is an eligible body?

An eligible body is an organisation that meets all of the following criteria:

  1. it is a non-profit making organisation

  2. the organisation’s constitution includes a non-distribution clause or limits the distribution of any profits / reserves to:

    1. another non-profit making club

    2. its members if the organisation is either wound up or dissolved

  1. the organisation uses all profits / surpluses from its playing activities to maintain or improve the related facilities or for the overall activities of the non-profit making organisation

  2. the organisation is not subject to any commercial influences or part of a wider commercial organisation (see the Exemption ― sport and physical recreation ― commercial influence guidance note)

VSPORT2010, VSPORT1030; Value Added Tax (Sport, Sports Competitions and Physical Education) Order 1999, SI 1999/1994

When is an organisation non-profit making?

The constitution should outline the main purpose of the organisation and whether the organisation has the ability to distribute profits or surplus income. The organisation should have a non-distribution clause in its constitution. There is no prescribed format for one of these types of clauses. However, some sample clauses are included in the attached document.

See the Exempt ― sport and physical recreation ― example non-distribution clauses guidance note.

For anti-avoidance purposes, HMRC will be looking at the body’s constitution, its activities and its use of funds to ascertain whether it was established with a purpose, intention or motive to exclude distribution of profits or surpluses by covert of overt means to other parties with a financial interest in the body (ie an associated person). The use of a non-distribution clause in itself is not sufficient

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