VBNB60860 - Clubs and associations: general information about service messes and service funds for junior ranks

Introduction
Types of service body
The special rules
Mess subscriptions
Other subscriptions
Levies

Introduction

HMRC and the Ministry of Defence have reached agreement in ten areas where special rules can apply to service messes. The services may refer to this as the ‘package deal’.

These ten special rules are incorporated into instructions on VAT which are issued by each of the services and are checked over with HMRC before amendment and issue. These are:

  • Royal Navy: BR18.
  • Army: Chapter 11, Service Fund Regulations.
  • RAF: Leaflets 218, 709, and 710.

This part of the manual contains:

  • an overview of the different bodies within the services which are concerned with the provision of supplies to personnel; and
  • details of the special rules.

The normal VAT rules apply unless this manual specifically provides otherwise.

If HMRC staff find an issue that cannot be resolved locally with a service mess they may wish to refer it, via their line management, to the appropriate services command representative. A list of command contacts is included in this manual.

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Types of service body

Within the three armed services a variety of bodies are associated with the provision of supplies to personnel. These bodies, which may or may not be subject to VAT, are:

  • Central Bank (Navy and Army)/Non-Public Accounting Section (RAF)

These are centralised organisations that administer the accounting for Messes and Welfare Funds. They are not treated as entities that are liable to register for VAT purposes.

  • Warrant officers’ messes, sergeants’ messes, and officers’ messes

These provide accommodation, meals and social facilities for different types of officer. Messes should be registered in their own names and not those of the officers in charge of the funds.

Subject to reaching the registration threshold each mess should be registered separately if there is more than one mess at the same establishment.

It is these bodies that are subject to the special rules detailed in this manual.

  • Service funds

These may also be referred to as ‘Welfare Funds’. They provide for unit junior ranks (corporals and below). In the army the fund is called the ‘President of the Regimental Institute Fund’; in the RAF the ‘Service Institute Fund’ and in the Navy the ‘Welfare Fund’.

Service funds may:

  • make taxable supplies in their own right (such as the use of gaming machines or sales); or
  • act as bankers for separate clubs or associations that exist below them.

Such clubs and associations should be treated as separate entities for VAT registration purposes in accordance with the normal criteria (see VATREG01000).

The funds themselves will be required to register for VAT if their taxable supplies exceed the registration threshold. Registration should be in the name of the fund itself and not that of the officer responsible. These funds are not subject to the special provisions that apply to messes and the normal VAT rules apply to them.

  • Corporals’ clubs / junior ranks’ clubs

These do not provide all the same services as a mess. A junior ranks’ club is more akin to a social centre. Commanding officers can set up separate corporals’ clubs if there are enough numbers at a station. Corporals are obliged to join and pay a subscription where these clubs exist

Subscriptions to these clubs, unlike messes, are to be treated as consideration for supplies of social and leisure facilities. The normal rules will apply despite the fact that the subscriptions are obligatory.

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The special rules

These special rules only apply to warrant officers’ messes, sergeants’ messes, and officers’ messes.

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Mess subscriptions

Serving members of the armed forces are bound by Queen’s Regulations. These require certain ranks to be members of a mess. Mess members are required to pay a monthly subscription, fixed by the commanding officer in accordance with limits laid down in the Regulations.

These subscriptions are contributions towards the mess’s running costs. They do not grant the right of membership to the mess. When paid by members of the regular and reserve forces, or serving foreign and Commonwealth service personnel, they are outside the scope of VAT.

When paid by retired servicemen, civilians and others not subject to Queen’s Regulations, they are standard-rated.

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Other subscriptions

Mess members may be required to pay other subscriptions under mess rules. A common example is a ‘silver fund’, where the money is used to:

  • buy regimental silverware or musical instruments; or
  • finance the running of a band.

If the payment is for something to be used generally by the mess, like silverware, it is merely an additional contribution towards general mess expenses and is outside the scope of VAT. However, if the payment is consideration for a specific supply to mess members it is taxable.

The most common standard-rated subscriptions are those used for the provision of entertainments, sports facilities and entertaining mess guests. The sporting exemption in Group 10, Schedule 9, VAT Act 1994 means that many sports subscriptions qualify for exemption.

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Levies

Mess members may be required to make additional, one-off payments towards the general mess fund. These payments are called ‘capital levies’ in the RAF.

Where these are merely an additional contribution towards general mess expenses they are outside the scope of VAT. Their liability will be that of the supply made if they represent payment for a specific supply. For example, if entertainment is provided it would be standard-rated.