Fit for VAT

My limited company client is registered for VAT and operates a fitness studio where individuals can either pay a subscription to join as a member or pay a daily fee of £5 to use the facilities.

In the case of the membership arrangement an individual can either pay an annual subscription of £99 in advance of joining or £10 a month by standing order.

My question is whether in the case of the monthly arrangement we can treat the extra £21 that is payable compared with the advance fee (£10 x 12 months less £99) as a VAT-exempt interest/finance charge thereby avoiding output tax on this amount.

We consider that this exemption would not affect the company’s input tax because of the partial exemption de minimis limits. We could formulate documentation (if necessary) to indicate that the £21 charge to the member relates to a finance...