Membership clubs tax: what directors should know

Private membership clubs can be useful for founders and directors. Clubs such as Soho House and similar private members’ spaces can offer somewhere to meet clients, work between meetings, attend events and build professional relationships. However, when the company pays for the membership, the tax treatment is not always straightforward.

Many directors assume that if the club is used for business, the company can claim the full cost without any further tax issues. In reality, membership clubs tax can involve benefits in kind, PAYE, National Insurance, Corporation Tax, VAT and client entertaining rules.

In this guide, we explain the key tax points UK directors should understand before putting a private members’ club through the company.

Can a company pay for a membership club?

Yes, a company can pay for a membership club. The more important question is how that cost should be treated for tax.

The tax position will depend on:

• Who the membership is for
• Whether the membership is personal to the director
• Whether there is any personal use
• Whether clients or suppliers are entertained
• Whether VAT has been charged
• How the cost is recorded in the accounts

A company payment does not automatically make the membership tax deductible or tax free for the director.

Is a membership club a taxable benefit?

In some cases, yes. If a company pays for a director’s private club membership and the director can use it personally, it may be treated as a taxable benefit.

This is particularly relevant where the membership gives access to:

• Restaurants
• Bars
• Lounges
• Social events
• Gyms or leisure facilities
• Member only spaces
• Accommodation or lifestyle benefits

Even where there is genuine business use, HMRC may still view private club membership as having personal value. This can create a benefit in kind that needs to be reported and taxed.

For owner managed companies, this is especially important. If the director and shareholder are the same person, the company still needs to treat the cost correctly.

What if the company pays or reimburses the fee?

If the company pays the membership fee directly, or reimburses the director for it, there may be tax and National Insurance consequences.

Depending on the arrangement, the company may need to consider:

• PAYE treatment
• Class 1 National Insurance
• P11D reporting
• Class 1A National Insurance
• Corporation Tax treatment
• VAT recovery

Reimbursing the director does not automatically make the cost tax free. The key question is whether the membership is genuinely a business cost, a personal benefit, or a mixture of both.

Private club membership vs professional membership

It is important not to confuse private membership clubs with approved professional subscriptions.

A professional membership might include an approved accountancy, legal, engineering or industry body. In some cases, these subscriptions may qualify for tax relief if they are relevant to the employee’s role and the organisation appears on HMRC’s approved list.

A private members’ club is different. These clubs are usually based around hospitality, workspace, networking, social access or leisure. They are not usually treated in the same way as professional bodies.

For example:

• An approved professional body may qualify for tax relief in certain circumstances
• A private members’ club is likely to need closer review
• Personal or social use can create a taxable benefit
• Client entertaining costs may still be disallowed

Can the company claim corporation tax relief?

Corporation Tax relief depends on whether the cost is incurred wholly and exclusively for the purposes of the business.

This can be difficult with private club memberships because there may be both business and personal use.

A director may use the club for:

• Client meetings
• Networking
• Working between appointments
• Business events
• Personal meals
• Social events

Where there is mixed use, it may be difficult to argue that the full cost is purely for the business. HMRC could challenge the deduction if the membership gives the director a personal benefit.

Accurate records are essential. If the company is claiming the cost, it should be able to explain why the membership was needed and how it was used for business.

What about client entertainment?

Client entertaining is one of the most common areas of confusion.

Even if a private members’ club is used for client meetings, the cost of entertaining clients is generally not allowable for Corporation Tax.

This may include:

• Client lunches
• Client drinks
• Hospitality for prospects
• Supplier entertaining
• Networking drinks with non employees

This means a company may pay for a client lunch at a members’ club, but the cost may still be disallowed for Corporation Tax.

Staff entertaining is treated differently and may sometimes be allowable, but it needs to be clearly separated from client entertaining.

Can you reclaim VAT on membership club costs?

VAT is another area where the rules are not always straightforward.

VAT recovery will depend on:

• Whether VAT has been charged
• Whether the cost relates to business use
• Whether there is personal use
• Whether clients or suppliers are being entertained
• Whether the VAT invoice is addressed correctly
• Whether the cost can be split between different types of use

VAT on client entertaining is usually blocked. If a cost relates partly to employees and partly to clients or guests, the VAT may need to be apportioned.

Directors should avoid reclaiming VAT on all membership club costs without reviewing the purpose of the expense.

Common tax issues directors miss

Membership club costs can create several tax considerations for directors, especially where there is personal use or client entertaining involved.

Common issues include:

• Taxable benefits in kind
• PAYE and National Insurance treatment
• P11D reporting
• Corporation Tax restrictions
• VAT recovery limits
• Client entertaining costs being disallowed
• Personal use creating a dual purpose problem
• Poor records making the business purpose difficult to support
• Treating a private club like an approved professional subscription

These issues are especially important for owner managed companies, where personal and business costs can easily overlap.

How to make the cost more defensible

If the company pays for a private membership club, the records need to be clear.

You should keep:

• The membership agreement
• VAT invoices
• Details of who the membership is for
• Evidence of business use
• Notes of business meetings where appropriate
• Details of attendees at client meetings
• A split between employee, client and personal use
• Board approval for the company paying the cost

Before putting the membership through the company, ask:

• Is the membership mainly for business use?
• Is it personal to one director?
• Will clients or suppliers be entertained?
• Will there be personal, family or guest use?
• Will the company reclaim VAT?
• Has the benefit been reported correctly?
• Is the Corporation Tax claim supportable?

A useful test is: would the company pay for this membership if the director did not personally benefit from it?

How Agile Accountants can help

At Agile Accountants, we support limited companies across the UK with practical, year round accounting and tax advice.

Membership clubs tax often links to director pay, benefits in kind, VAT, Corporation Tax and client entertaining. Our role is to help directors understand the full picture before costs are put through the company.

We can help you:

• Review whether a club membership creates a taxable benefit
• Check PAYE, National Insurance and P11D treatment
• Assess whether Corporation Tax relief is supportable
• Review VAT recovery and entertainment restrictions
• Separate staff entertaining from client entertaining
• Improve record keeping for HMRC
• Build clearer policies for director expenses and benefits

For busy founders, the aim is simple: make confident decisions, avoid unexpected tax problems and keep company spending properly documented.

Final answer: can directors claim membership clubs through the company?

A company can pay for a membership club, but that does not mean the cost is automatically tax efficient or fully deductible.

For private members’ clubs such as Soho House or similar spaces, directors need to consider benefits in kind, PAYE, National Insurance, Corporation Tax, VAT and client entertaining rules.

The biggest risk is assuming that business use makes the whole cost allowable. If the membership is personal to the director, includes social access or is used for client entertaining, the tax treatment may be more complicated.

The safest approach is to review the position before the company pays, keep clear records and make sure any taxable benefit is reported correctly.

At Agile Accountants, we help owner managed businesses and fast growth start ups understand what can be claimed, what needs to be reported and how to avoid unnecessary tax complications. Contact us today if you would like help reviewing director expenses, benefits or membership costs.