No lump sum option

Did gym membership payment include an exempt supply of credit?

In the first year of joining the gym as a ‘results’ member an individual could make an advance payment of £593.45 or 12 individual monthly payments of £53.95. It was accepted that the instalment arrangement included an exempt credit charge of £53.95 (£4.50 a month).

At the end of the first year the member could continue to pay monthly instalments of £53.95 and had the right to cancel the arrangement by giving three months’ notice to the gym. The directors considered that the second and subsequent years’ payments continued to include an exempt credit charge of £4.50 in each monthly payment. HMRC disagreed saying members were not given the option of making an annual payment in advance in the second and future years of membership only in the first year. As a result there could...