Charging VAT to a non-VAT registered business

[Deleted member 301603]

I signed a 12 month contract to rent a sporting facility to coach but inadvertently signed as my limited company name and number. The seller has only just realised after 6 months that the contract was not in just my name personally. As I'm not a sole trader their contract states VAT is chargeable on top of the hourly rate I already pay to use the facility and are now backdating this and have provided me with invoices totalling £1200 so far.

As I'm not VAT registered can they charge me for this? I ask as gov.uk states "If you sell a customer a product or a service, you need to give them an invoice (bill) by law if both you and the customer are registered for VAT (a business to business transaction)." Clearly both parties are not registered and furthermore the payment for the hire comes from a personal bank acc not a business (so not a business to business transaction). Does that make a difference?

The current hourly rate I pay is seemingly exempt from VAT to all coaches unless you sign the contract as a limited company. If it's not then surely I'm being taxed twice??

I contacted HMRC via web chat but they just stated the supplier should be charging VAT on all goods supplied regardless of sole trader or Ltd Company. They suggested asking if there are two rates of VAT charge being made by the supplier.

Just looking to see where I stand and whether I'm able to refuse their request for payment?

Thanks in advance

 

[Mr D]

Not sure how your limited company not being VAT registered makes a difference. Do your company normally get charged VAT by other businesses who are VAT registered?

 

[Deleted member 301603]

I don't need to deal with any other companies so this is the first time dealing with paying VAT for the hire I use. It would appear that had I just signed the contract in my name only the supplier would be none the wiser and this wouldn't have become an issue.

 

[Deleted member 301603]

One possible course of action would be to advise them as of December I'll be reverting to sole trader with no further invoices required and ask for a new contract to sign simply in my name that would see me through to next March when the 12 months expires.
Obviously I'd have to pay the VAT accrued up to November but I'm reluctant to revert to ST due to the increase in tax as opposed to trading as a company.

 

[Mr D]

And your remaining term of the 12 month becomes immediately payable, with VAT? Or the contract allows for changes?

 

[Deleted member 301603]

The contract allows me to purchase time slots on a pay as you go basis so I wouldn't need to 'pay up' to the end of March if the contract was cancelled. And my understanding of the T&C's is that 24 hours notice must be given of contract cancellation.

 

[Mr D]

Yes but you and the limited company are not the same legal entity. You aren't currently purchasing. Your company is.
Check whether they are amenable to making changes before making changes. If only 24 hours notice needed then is it a 12 month contract?

 

[Paul Kelly ICHYB]

If they are VAT registered and the goods/services they supply you are VATable, they should charge VAT.

 

[billmccallum1957]

I signed a 12 month contract to rent a sporting facility to coach but inadvertently signed as my limited company name and number. The seller has only just realised after 6 months that the contract was not in just my name personally. As I'm not a sole trader their contract states VAT is chargeable on top of the hourly rate I already pay to use the facility and are now backdating this and have provided me with invoices totalling £1200 so far.

As I'm not VAT registered can they charge me for this? I ask as gov.uk states "If you sell a customer a product or a service, you need to give them an invoice (bill) by law if both you and the customer are registered for VAT (a business to business transaction)." Clearly both parties are not registered and furthermore the payment for the hire comes from a personal bank acc not a business (so not a business to business transaction). Does that make a difference?

The current hourly rate I pay is seemingly exempt from VAT to all coaches unless you sign the contract as a limited company. If it's not then surely I'm being taxed twice??

I contacted HMRC via web chat but they just stated the supplier should be charging VAT on all goods supplied regardless of sole trader or Ltd Company. They suggested asking if there are two rates of VAT charge being made by the supplier.

Just looking to see where I stand and whether I'm able to refuse their request for payment?

Thanks in advance

3.3.2 Sports coaching
Sports coaching by professionals is not within the exemption as it is not supplied by an eligible body - see section 4 below.

However, such coaching may fall within the scope of VAT exemption for education. Notice 701/30 Education and vocational training, gives more information on coaching/ tuition.
https://www.gov.uk/government/publications/vat-notice-70145-sport/vat-notice-70145-sport

 

[CaMaNo]

No exemption if supplied through the Ltd company.

 

[STDFR33]

You say they provide facilities. They therefore do not seem to be supplying coaching or coaching, so they cannot be supplying an exempt supply in that respect.

The supply of land can be VAT exempt, but if they provide other things such as equipment etc, it would be a standard rated supply to you.

I'm struggling to see how the VAT status of a supply of facilities is effected by the person you are supplying it to.

Ultimately, you need to read the contract to see if it states exclusive or inclusive of VAT.

I'll have a further think, but perhaps @lesvatadvice can shed some light?

 

[Chris Ashdown]

Is it not the case that its nothing to do with coaching, they are supplying you the use of a hall which will always be vatable regardless of any job or profession,

Your act of actually coaching a sport may be free of vat but that's to your clients
A strange thing is postage stamps which are non vatable but if a company charges the cost of posting something to you then it becomes vatable

 

[STDFR33]

A strange thing is postage stamps which are non vatable but if a company charges the cost of posting something to you then it becomes vatable

Not necessarily.

The VAT on postage follows that of the supply. If you supply someone zero rated, such as children's clothing, then the postage would be zero rated too.

 

[Mr D]

Not necessarily.

The VAT on postage follows that of the supply. If you supply someone zero rated, such as children's clothing, then the postage would be zero rated too.

Unless using royal mail who charge you the VAT....

 

[STDFR33]

Unless using royal mail who charge you the VAT....

Huh?

 

[kulture]

can we move off the Royal Mail and postage VAT which is needlessly complex and a poor example for this thread

 

[Mr D]

Huh?

You can charge someone zero VAT on postage when they buy the postage for a product while having to pay VAT out to send it yourself. Such as through OBA.

 

[STDFR33]

You can charge someone zero VAT on postage when they buy the postage for a product while having to pay VAT out to send it yourself. Such as through OBA.

Thanks. Now it makes sense.

Now let us both run along before Kulture moans again.

 

[Mr D]

Thanks. Now it makes sense.

Now let us both run along before Kulture moans again.

Runs off very slowly...

 

[spidersong]

Moving from the postage and back to the original.

This may be a question of what they are supplying to you whether it's a supply of a right over land or whether it's 'sporting facilities'.

There are a few complications here: firstly land is normally exempt (under VAT Act 1994 Sch. 9 Item 1) but excluded from that is "the grant of facilities for playing any sport" so most sport hires are standard rated, but if it's supplied on a block booking to a school, club or organisation then it can go back to being exempt as it's seen as purely a supply of land rather than sports facilities.

So for the most part any sports bookings will be standard rated so no help to the OP there and it also doesn't bring in an individual/ltd company distinction.

So since they are exempting some of it to some people by the looks of things that probably means they're applying a different part of the law.

Group 10 of the same schedule says that an 'eligible body' [A non-profit organisation, basically a charity] making supplies to 'an individual of services closely linked with and essential to sport' should exempt those supplies. So the law makes no distinction between a VAT registered person and a non-registered person, just between individuals (natural persons) and other entities (such as a Limited Company, a body corporate).

I'm afraid that if the ltd company is the one that entered into the contract and their contract says they'll charge non-individuals VAT then you've signed up to pay the VAT and they're within their rights to demand it. If the signing as a ltd was accidental and both parties knew it was intended to be to an individual then I'd hope that they'd be able to novate the contract to the proper entity.

But the question may be are you using the facilities as an individual or as a company i.e. are you billing your clients in your own name or as a company. If it's actually the company using it then I'd expect them to probably refuse, as I'd assume that the contract wouldn't allow you as an individual to 'sublet' the pitch to your limited company for it to trade on.

 

[lesvatadvice]

The issue appears to be whether the exemption for a supply of land applies, or whether the exception for the provision of sports facilities applies, or the exclusion from the exception for certain bookings. Refer to @spidersong's helpful comments.
Or, invite a specialist to look at the correspondence.

 

[Gecko001]

As I'm not VAT registered can they charge me for this? I ask as gov.uk states "If you sell a customer a product or a service, you need to give them an invoice (bill) by law if both you and the customer are registered for VAT (a business to business transaction)." Clearly both parties are not registered and furthermore the payment for the hire comes from a personal bank acc not a business (so not a business to business transaction). Does that make a difference?

If the other party is not registered for VAT they cannot charge VAT.

What could be happening is that this supplier is a middle-man who is not registered for VAT but his supplier is. If he is not registered for VAT it is illegal for him to charge you VAT as in providing a VAT receipt with the VAT itemised separately. He pays the VAT to the supplier still but that is just a cost to him that he has to take into account when he giving you a quotation.

That is all an aside as it is up to him to sort this all out. The fact that you are or are not registered for VAT or that you are paying as a sole trader or a Ltd is irrelevant to him as far as I can see.

You need to get your accountant on to this one and not negotiate with this supplier until you have got their professional advice.

 

[Mr D]

If the other party is not registered for VAT they cannot charge VAT.

What could be happening is that this supplier is a middle-man who is not registered for VAT but his supplier is. If he is not registered for VAT it is illegal for him to charge you VAT as in providing a VAT receipt with the VAT itemised separately. He pays the VAT to the supplier still but that is just a cost to him that he has to take into account when he giving you a quotation.

That is all an aside as it is up to him to sort this all out. The fact that you are or are not registered for VAT or that you are paying as a sole trader or a Ltd is irrelevant to him as far as I can see.

You need to get your accountant on to this one and not negotiate with this supplier until you have got their professional advice.

Would you expect the other party to be registered for VAT if they are trying to charge it?

 

[Gecko001]

Would you expect the other party to be registered for VAT if they are trying to charge it?

Yes, but the OP says that "both parties" are not VAT registered.

 

[Mr D]

Yes, but the OP says that "both parties" are not VAT registered.

Just hard to understand one party trying to charge VAT if they aren't VAT registered.

 

[Gecko001]

Just hard to understand one party trying to charge VAT if they aren't VAT registered.

Exactly.

 

[spidersong]

When the OP says 'clearly both parties are not VAT registered' I've taken it to mean that since the quoted guidance required both parties to be registered it can't apply as clearly both parties are not VAT registered since the OP's not. I don't think he's saying the other party isn't, just that he's not and so 'both' aren't.

 

[AccountOnThis]

I don't know the ins and outs of the legal position about the contract, but normally whether you are VAT registered or not would make no difference. If you are not a business (or not a VAT registered business) then the company don't have to *show* the VAT on the invoice. However they will still have to charge it. Hope that makes sense...!