Dance Schools and VAT

Dance Schools and VAT

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Good Morning All,

My friend runs a dance school (profit making) and has been advised by her accountant that she does not need to register for VAT as its a business that supplies education.

She is in the process of looking for a commercial property to rent or buy to turn into a dance studio.  Both options of course have VAT implications.

Could she register for VAT and therefore be able to reclaim the VAT on the rent/purchase as well as the usual business expenses but not charge VAT on her dance fees as presumably its classed as zero rated?

I look forward to hearing your thoughts on this matter.

Replies (7)

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Image is of a pin up style woman in a red dress with some of her skirt caught in the filing cabinet. She looks surprised.
By Monsoon
03rd Nov 2011 09:40

VAT on tuition

If she is self employed, then the tuition she personally carries out is exempt (not zero rated) from VAT. I do not believe she can opt to standard rate this, but I am not sure.

If she employs anyone to carry out the tuition for her, then that supply is standard rated.

In this case, she would be in a partial exemption situation and recovery of some input tax may be blocked, subject to de minimis limits.

If she trades through a limited company, the supply is standard rated no matter who provides it.

Note that the tuition/ education has to meet the criteria for it to be exempt, otherwise it is standard rated.

VAT notice here:

http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.por...

 

 

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By George Attazder
03rd Nov 2011 10:56

Unless she thinks her accountant is giving incorrect advice..

... she should consult her accountant.  If she thinks she is receiving incorrect advice, she should find a new accountant and take advice from them.

As Monsoon indicates, this is a complex area.  Even acting individually and independently, it is possible for her to make both exempt and standard-rated supplies.

If she is making wholly exempt supplies she cannot register for VAT and will not be able to recover any input VAT she incurs.

As Monsoon suggests, the options are forcing partial exemption, or incorporating so that all her supplies are standard-rated.  She is likely to have to bear the VAT that she will then have to charge though, as her customers are likely to be members of the public.

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By Sheila Morrison
03rd Nov 2011 12:24

Dance school and VAT

I am having problems in this area.

VAT office advised that business could register for VAT and if using the Flat Rate scheme then that applies to all tuition whther given by the owner or by other people.

If using the standard VAT method then self taught is exempt and other people teaching is stadard rated..

However there has apparently been a Tribunal Hearing where this ihas been overturned and they ruled that ALL dance intruction was VAT exempt. I have searched for further details of this case but so far have been unable to find them (The Revenue were going to appeal)

 

We have asked for our client to be Deregistred (which has happened) but they have ruled that because we were using the Flat Rate scheme then no repayment of VAT is due as would be the case if we had used the option to split the tuition between self taught and other teachers.

 

We have appealed using the Tribunal Hearing as an exmple and await further correspondence.

Sheila Morrison

 

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By refs8
03rd Nov 2011 12:26

Keep me posted

Please keep me posted as have a similar client thanks

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By carnmores
03rd Nov 2011 12:56

i reckon that if the treshhold is exceeded

they must register for VAT i disagree that this qualifies for any exemption

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By George Attazder
03rd Nov 2011 13:40

No way! no way!

@Carnmores.  Guessing frequently elicits an incorrect answer.

"The supply of private tuition, in a subject ordinarily taught in a school or university, by an individual teacher acting independently of an employer" is exempt by virtue of Item 2 of Group 6 of Schedule 9.  Dance has been held to be a subject ordinarily taught in a school or university, and so within the exemption.

@Sheila.  I've had a hunt too and drawn a partial blank.  I find it hard to believe that a tribunal would err so badly as to ignore the "acting independently of an employer" aspect of item 2 that has been the subject of recent tribunal decisions, most recently that I can remember being Marcus Webb, the golfer.

Such a decision would be directly contrary to the decision in JA and SL Charles (VTD 17922), riding instructors operating in partnership and employing instructors.  The instruction by the partners was held to be exempt, while the instruction by the employed instructors was held to be standard-rated.

Whilst not a recent decision, you may be referring to the Lait Dance Club decision (VTD 17038) where the dance instructors engaged by Thomas and Patricia Lait charged for their instruction, purporting it to be exempt, and the Laits charged the instructor a corresponding rent, purported to be exempt.

The tribunal held that their instruction was given by the club, and so not given independently of an employer , and so not exempt.  It was further noted that the purported rent arrangement would not be exempt in any event.

You should also remember that any FTT decision is not a binding authority.

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By carnmores
03rd Nov 2011 16:56

George - i stand corrected BUT

we took advice , i cant remember where from at present as my colleague was dealing with it, and were informed that in this case ie teaching of 'dancing' to under 10s did not fall under the noted eductaion clause.

so it was not guessing , tho it may still be wrong!

thanks for the input i answered to elicit a response

PS i seem to remember that you could not just set up shop and call yourself a school for VAT purposes did it not have to be ancillary to a registered place of education

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