Supply continues

The taxpayer company ran health and fitness clubs. Members signed up for at least a year and paid the fees in advance either annually or by a monthly direct debit.

Membership was not terminated if the member defaulted but access to the clubs was denied until the fees were brought up to date.

The First-tier Tribunal decided the late paid fees were compensatory in nature not consideration for a supply of services and were outside the scope of VAT.

The Upper Tribunal overturned the decision. The taxpayer appealed.

The Court of Appeal found members’ access to the clubs was conditional on the payment of a regular fee. Excluding defaulters did not mean they were denied services: they still had the right to access the clubs but only if they settled the membership payments.

Lady Justice Arden said “There was a continuing supply of a...