Readers’ forum: Sports charity

I act for a sports charity that has been gifted some land by the local council to build a new indoor tennis facility – it will be funded in part by a large donation from a tennis player along with a range of grants from central and local organisations.

The trustees accept that VAT will be charged on the construction services supplied for the new facility because there will be membership fees charged for playing and also fees received from guests and non-members on an hourly or daily basis; in other words business supplies are being made.

As I understand it there is no scope to register for VAT and claim input tax on the construction costs because the playing fees will be exempt from VAT. But one of the trustees has suggested that a trading subsidiary of the charity should be formed...