Gym bosses warm up for battle over VAT burden

Industry says cutting tax on memberships would improve nation's health, reports James Ashton

The fitness industry is limbering up for a campaign to cut taxes on gym membership, arguing a move could reduce the strain on the National Health Service.

Bosses want keep-fit enthusiasts to be exempt from the standard 20 per cent VAT rate, which is levied on monthly subscriptions.

In a push that is expected to gather momentum this autumn, they will press for a reduced tax rate of 5 per cent, enough to cut the price of a typical monthly pass from £45 to £40.

Andy Cosslett, the chief executive of gym chain Fitness First, said: "We are not ready to discuss this with government just yet because we have got other priorities, but the fact remains everyone can see the health budget is unsustainable, the nation needs to get fitter, and yet we are penalising companies that are providing health and fitness products because we are charging them as a luxury item."

The reduction would bring gym membership into line with protein foods, some health supplements and nicotine patches.

After-school clubs are also subject to the levy, unless they are run by the school in question and not an outside agency.

Mr Cosslett added: "I just don't see any downside other than a little bit of money to the Exchequer, but it would promote the story that fitness is important – it's just an example of joined-up government.

"If you want to stimulate people's health and fitness, give them something that motivates them to do it," he said.

The idea for a cut, which is expected to be championed by trade body UK Active, is not new. A decade ago, accountants at KPMG said the introduction of US-style tax breaks to encourage gym membership – beyond the benefits already offered by companies' in-house gyms – would tackle rising levels of obesity.

Peter Roberts, the chief executive of Pure Gym, the low-cost operator acquired by CCMP Capital Advisors in May, also supports a cut in VAT for the sector. He said: "It would definitely make a difference. Particularly in areas where affordability is key for households, then every penny that you can reduce the fees by the more likely you are to get people to join and take regular exercise."

The gym industry also has its own vested interest in broadening appeal and increasing loyalty. Only 12 per cent of Britons are gym members, and membership turnover is high as half of all people with a subscription quit every year.

After three years in the job, Chancellor George Osborne has grown used to being lobbied furiously by different parts of the business world. Last week, it was the turn of the tourist industry to call for a reduction in VAT from 20 per cent to 5 per cent, making it easier for hotels and attractions to compete with rivals in Italy and France where taxation is lower. The CutTourismVAT campaign, spearheaded by the British Hospitality Association, said its proposed tax reduction would generate £4bn in new revenue.

The March Budget brought cheer for the brewing industry when the Chancellor scrapped the alcohol duty escalator which added inflation plus 2 per cent to the price of a pint. A longer-running campaign by the London Stock Exchange also claimed success when the stamp duty on trading shares listed on the junior Alternative Investment Market was abolished.