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Not for the first time the VAT tribunal has had to decide whether VAT has to be paid on the full customer payment or only part of it.  This time the argument centred on subscriptions paid for membership of the Harley-Davidson Owners Group (HDOG), which is run as part of the worldwide trading group.

While there’s an extra-statutory concession to protect subscriptions for non-profit making organisations allowing them to apply different VAT rates, the same rules don’t apply to profit making organisations.  Here the presumption has always been that VAT will apply to the whole subscription.

The tribunal had to take into account the significant volume of precedent case law on the question of whether something is one single supply or a package of separate supplies.  The tribunal disagreed with HMRC’s view that the subscription was paid for a principal supply of VATable membership to which all of the other elements were ancillary.  Instead the tribunal decided that in order for something to be ancillary it must be subservient, subordinate and ministering to something else.

Adopting this line of reasoning the tribunal decided that the HDOG benefits were –

  • all capable of being enjoyed separately;
  • were not indivisible,
  • nor capable of being artificially split.

As none of the benefits could be treated as being ancillary to any of the others, different VAT rates could be applied to different parts of the subscription payment.

I think this is a fairly surprising decision so it will be interesting to see if HMRC decide to appeal.  In the meantime profit-making organisations levying subscriptions should tread carefully before not charging VAT on full subscription payments.