Corporate Membership of Club

[GLAbusiness]

Limited Company, 2 directors/employees )self and wife), not other employees, VAT registered

We want to join a local club - nothing directly to do with our business activity - although we would meet other members, for meals, drinks, social events etc.. The club is VAT registered and offers personal memberships and corporate memberships. Similar cost for 2 of us.

If we choose corporate membership:

1. Can a company provide this benefit to all its employees
2. Can the company reclaim the VAT
3. Is it tax deductible
4. Would it be a BIK
5. Would it make a difference if we charged the cost to our Directors Loan accounts

Grateful for any advise

 

[GLAbusiness]

Just noticed that the club is a registered charity - does this make a difference?

 

[JBlack]

1. Yes
2. No
3. No
4. I think it would be treated as additional income and therefore liable to employer NIC
5. Make a difference to what? If you mean the tax position, then no

 

[UK Contractor Accountant]

1. Yes
2. Yes if membership offered to all employees
3. Yes if part of the remuneration package
4. Yes
5. Not really- stick with 1 to 4 above.

 

[JBlack]

It isn't for the purpose of business.

https://www.gov.uk/reclaim-vat

 

[UK Contractor Accountant]

Don't be fooled in believing everything on the HMRC website is correct. It's their intrepretation of the law.

You can claim the vat back if the invoice is made out to the company and the offer of club membership is made to all employees.

 

[UK Contractor Accountant]

I would add I am talking about sports & health clubs, golf clubs etc.

 

[JBlack]

Do you think they would uphold the claim in the event of an audit? If they were not to do so, would there be any recourse? Is there any body that regulates HMRC, or from whom rulings can be requested?

 

[UK Contractor Accountant]

Do you think they would uphold the claim in the event of an audit? If they were not to do so, would there be any recourse? Is there any body that regulates HMRC, or from whom rulings can be requested?

Yes of course it would - it's for the puropose of the business and part of the remuneration package for the employee.

 

[UK Contractor Accountant]

Remember you can put what you like through your company - school fees, home electricity, holidays etc. Provided the company contracts with the provider and its part of your remuneration package the cost is tax deductible for the company.

The downside is that the cost (inc vat) needs to be included on form P11D for the employee and taxed accordingly at their marginal rate of tax. So if you are higher rate taxpayer you will pay 40%/45% tax on the cost wheras the company would only have received 20% tax relief.

 

[GLAbusiness]

1So, Lets say the membership cost is £500 plus VAT = £600 and I am on 40% tax band

Option 1: Take a dividend from the Company to cover cost. No tax break for Company and no VAT claim. I need a dividend of £600 plus the tax I will have to pay on the Dividend. Not sure of the maths here but say this is a Dividend of £700, and I get a tax bill for £100. Company pays out the £700 from profits

Option 2: Corporate membership through Company. Company gets £100 VAT reclaim and tax relief on the £500 net cost of £100. So the company profit decreases by £400.

The I get taxed at 40% on the £600 which is £240. So I'm £160 better off to do it through the company.

Does that make sense?

 

[kevin.doran]

I'll go out on a limb here, quick beer mat figures:

Option 1

Company makes sale of £1000 + VAT
Has bank balance of £1200
Pays £200 VAT to HMRC
Pays £200 Corp Tax
£800 cash/profit retained with is distributed to you as divi
You pay £200 in personal tax
You're left with the £600 you need to pay membership personally

Option 2

Company makes sale of £1000 + VAT
Pays £500 + VAT membership fees
Pays £100 VAT to HMRC (£200 less £100)
Pays £82.80 Class 1A NI following P11D submission
Pays £83.44 Corp Tax
Company has £333.76 cash/profit retained
£600 benefit goes on your P11D
You pay personal tax of £240
You need £320 divi to cover the £240 personal tax
Company distributes the £320, is left with £13.76

 

[GLAbusiness]

Thanks Kevin,

Just one point - I don't take a salary from the company (other taxable income) so would the company still incur the £82.80 NI or is the company now left with £96.56

 

[kevin.doran]

I seem to remember controlling directors always require a P11D irrespective of earnings but i'd have to brush up on that in all honesty. It should be in here somewhere if you get chance before me.