Help VAT Masters

[letsdance]

I run a brand new dance company formed 10th Sept 2010, Thus have no income as yet...

In 6mths I will be receiving funds that will place me over the threshold ie.. £70k.

I can't add vat onto my students as they would leave. If I pay it, I will end up short having to pay teachers, rent etc

I've given out 8 scholarships this year...

Any suggestions please...

Sarah

[Scalloway]

What do you mean by funds? If it is loan or share capital VAT does not apply.

[robindunne]

I run a brand new dance company formed 10th Sept 2010, Thus have no income as yet...

In 6mths I will be receiving funds that will place me over the threshold ie.. £70k.

I can't add vat onto my students as they would leave. If I pay it, I will end up short having to pay teachers, rent etc

I've given out 8 scholarships this year...

Any suggestions please...

Sarah

You can of course claim the VAT back on your purchases. Also, have you looked at the flat rate scheme?

More information here:

http://www.hmrc.gov.uk/vat/start/schemes/flat-rate.htm

[akirk]

If you plan to have a business which will turnover above the VAT threshold then your business plan must allow for VAT - if you have to compete in a market with selling to non-registered customers at a certain price then that price has to be inclusive of VAT and you will get less (roughly 15p in the pound less) and it goes up next year, so your amount will go down.

If it is not feasible to do that - i.e. you can not run the business on that basis then you must run with a turnover less than £70K which may not be possible - or you don't have a business.

As Scalloway says - this is about turnover - but at the end of the day, if it goes above the threshold, VAT is there...

Alasdair

[David Richards]

I can't add vat onto my students[...]Dance classes may count as education. If you are providing education and you are a sole trader or a partnership, then your classes may be exempt from VAT. The rules are a bit complicated; see VAT Notice 701/30 (http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageLibrary_PublicNoticesAndInfoSheets&propertyType=document&columns=1&id=HMCE_CL_000117) for details.

[spidersong]

It's important to pin down what the funds are - if it's consideration for a supply you'll make then you'll be over the threshold and need to register, unless your servcies are exempt as per Davids post.

One thing that springs to mind though is, is this a grant? If this is a true grant then it won't be taxable turnover for VAT purposes and wont put you over. You do need to be careful with grants however that any service level agreements or similary conditions don't amount to a contract for services that makes the income taxable turnover.

Another thing to watch out for is is this a commercial dance company, or are you a not for profit organisation? If not for profit then the education exenmption may apply even if not a sole prop or partnership, you may also find that admission to performances is exempt under the exemption for cultural services.

[Homshaw]

It's important to pin down what the funds are - if it's consideration for a supply you'll make then you'll be over the threshold and need to register, unless your servcies are exempt as per Davids post.

One thing that springs to mind though is, is this a grant? If this is a true grant then it won't be taxable turnover for VAT purposes and wont put you over. You do need to be careful with grants however that any service level agreements or similary conditions don't amount to a contract for services that makes the income taxable turnover.

Another thing to watch out for is is this a commercial dance company, or are you a not for profit organisation? If not for profit then the education exenmption may apply even if not a sole prop or partnership, you may also find that admission to performances is exempt under the exemption for cultural services.

I once read up on this but the whole area was really confusing.

If you are a sole trader and you do the teaching personally there is no VAT. If you do it via an employee or subcontractor I think VAT becomes chargeable. As pointed out a Limited Company charges VAT on tuition

The lady who was asking me had a Community Interest Company doing acting and signing for children which was not for profit although it did use and pay subcontractors who clearly were doing it for profit.

There was a section of my VAT book which went into detail as to how VAT worked with charities but what I could not find out was how these applied to "not for profit" CIC.

The rules on sponsorship, fundraising, advertising and even the sale of hoodies and teeshirts are too complicated for financially pressed organisations to deal with without skilled advice. Yet if they think something is exempt and it isn't they could be in trouble

[Scalloway]

There was a section of my VAT book which went into detail as to how VAT worked with charities but what I could not find out was how these applied to "not for profit" CIC.



They apply just the same as for any business.

[Homshaw]

They apply just the same as for any business.

Thank you the reply

So a CIC

won't reclaim VAT on advertising unless it is VAT registered
can treat grants as exempt as long as there is no more than a simple thank you on a programme
So what about fundraising. I haven't got my book with me but the rules were really complex. Are the fundraising rules the same for CICs as charities?

Even the clothing was a bit confusing. From memory it depended on size but with some provision about outfits usually worn by children's groups.

Just asking out of interest. I won't be offering advice because I'm a long way out of my comfort zone

[cathydev1]

I read with interest the post about the dance company and am in a similar predicament. I run a football in the community programme and my turnover is approaching the threshold on account of funding I receive from a local companys community fund which is used specifically to provide coaching into special needs schools, providing holiday activity schemes for children etc.. Does this fall outside of the scope of VAT as no parents/schools are boing charged for the activities specifically related to this funding? Does it also not fall under the education umbrella?

[Scalloway]

In general grants are not subject to VAT. From this page

http://www.hmrc.gov.uk/charities/vat/income.htm

A freely given donation for which nothing is given in return is non-business income and is outside the scope of VAT.