VAT exemption for Private Dance School?

I have been VAT regd. for 2 yrs, when my income hit the threshold, now I think i could be exempt?

Didn't find your answer?

 I have a private dance school, based in my leased studios, which I have sole-ownership for, it is not a limited company. I assumed I had to go VAT registered, when I was nearing the threshold, approximately 2 years ago. We deliver about 80% of our classes for ISTD examinations. ISTD is the largest UK dance associations and is regulated by the Government organisation Ofqual and QCA. I teach about 10% of these classes , I have one employee and 9 self employed teachers who teach the remainder of the classes. I have just found out that dance schools who deliver ISTD examinations are recognised as an educational establishment and therefore exempt from paying PR licence. This prompted me to enquire whether my fees/services could be exempt or partly exempt from VAT. Going VAT registered has been a nightmare, simply because of increased prices and I have taken a considerable drop in my own salary to ensure the fees were 'acceptable' to my parents. Can you advise and point me in the right direction?

Replies (11)

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chips_at_mattersey
By Les Howard
26th May 2017 16:03

You can seek full refund of output tax incorrectly declared on exempt activities, which will also cost you any input tax you have claimed. A VAT 652, with a covering letter, explaining why you registered initially, and why you think you were wrong to do so.
If possible, refer to HMRC guidance and legislation, etc.

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RLI
By lionofludesch
26th May 2017 16:40

Les - what would be your view on Unjust Enrichment in such a case ?

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Replying to lionofludesch:
chips_at_mattersey
By Les Howard
26th May 2017 17:56

That is one of HMRC's potential objections.

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Replying to leshoward:
RLI
By lionofludesch
26th May 2017 18:05

leshoward wrote:

That is one of HMRC's potential objections.

Mmmm. Thought so.

Despite the OP describing it as a financial struggle.

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Replying to lionofludesch:
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By shaun king
26th May 2017 20:38

lionofludesch wrote:

leshoward wrote:

That is one of HMRC's potential objections.

Mmmm. Thought so.

Despite the OP describing it as a financial struggle.


But as always it is for HMRC to raise the question of unjust enrichment and with smaller businesses they seem less likely to do so. So just prepare the claim and submit it for all the Output less Input VAT accounted with reasoned argument and let HMRC decide their course of action.
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Replying to lionofludesch:
By Ruddles
26th May 2017 22:08

It would depend, in part at least, on what happened to her prices when she registered. There is a suggestion that they were increased, so HMRC would be (subject to the comment about being more relaxed with smaller businesses) more inclined to refuse on grounds of UE.

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Replying to Ruddles:
RLI
By lionofludesch
27th May 2017 08:35

Is unjust enrichment an all-or-nothing provision?

The OP seems to have increased her prices but has borne some of the cost personally.

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Chris M
By mr. mischief
26th May 2017 17:00

This is very tricky. I had an enquiry into a dance teacher client - a £70k VAT enquiry into a £100k sales business so no small beer - and we won.

They key is that under VAT Act 1994 lessons must be

“in a subject ordinarily taught in a school or university, by an individual teacher acting independently of an employer” under the VAT Act 1994 Schedule 9 Group 6 Item 2.

In the case of my client she is present at all the lessons but uses assistants. That is why we won the enquiry, she is a sole trader dance school delivering - or overseeing - all of the classes as the head teacher.

So this one may come down to exactly how you are delivering the classes. Clearly for classses involving your one employee that element is not exempt, but the rest of it could be depending on the extent of your personal involvement and visibility.

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By Ruddles
26th May 2017 22:06

I realise that the horse has long bolted in this case but this should serve as a warning to all other unrepresented business owners that taking a DIY approach to tax, and VAT in particular, is foolhardy. That's not to say an accountant would necessarily have given the right advice here but if not at least you'd have had someone to sue.

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Replying to Ruddles:
RLI
By lionofludesch
27th May 2017 08:35

Quite.

Classic case of the perils of DIY accounting.

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By Dick Stastey
27th May 2017 10:47

As far as I can see, only 10% of the classes are exempt, as 90% are delivered by employees/subcontractors (as per Marcus Webb).

If the classes delivered by the proprietor and the employee/subcontract teachers are charged at the same VAT-inclusive price, then I don't think an unjust enrichment argument has any merit.

The use of the term PRIVATE dance school, suggeststhat it is not an eligible body, and it is, therefore, the private tuition exemption that is in point.

Incidentally, how have respondents deduced that the OP is female?

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