Q&A: VAT reclaim on work gym membership

Croner VIP Tax Team

In this week’s Q&A, Abdul Hussain, adviser at Croner VIP Tax Team, considers the VAT position if an employer provides gym membership as part of salary sacrifice or as a benefit in kind.

Q Can a business reclaim VAT on a gym membership for employees provided as part of their remuneration?

A Whether or not the business will be able to recover input VAT on the gym membership will depend on whether the membership is a perk or supplied by the employer as part of a salary sacrifice arrangement.

If it is part of a salary sacrifice arrangement, the business is deemed to have supplied the gym membership to the employees in return for a consideration, in other words a deduction from salary.

In this situation output tax would be applicable to the supply of a gym membership. It is important to note there may be other supplies made under a salary sacrifice arrangement so each would need to be reviewed.

If output VAT is applicable to the salary sacrifice then related input tax can also be considered ‘subject to the normal rules’.

If the gym membership is a reward or ‘perk’ for employees, ie, provided for free, then for input VAT to be recoverable the perk must be available to all the employees of the business as per HMRC manual VIT43700.

If the perk is only available to specific employees, VIT43700 confirms that the VAT incurred may not be recoverable, or the business may need to make an output tax charge for the ‘private use’.

Useful links

For further information, go to Croner Navigate Tax 10-400 Salary sacrifice and 10-420 Benefits provided for no charge