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VAT on Childrens Nursery

We have just launched a childrens nursery, in space leased from a school.

Capital and other costs have exceeded £30,000 plus VAT. At the outset we were told that we would be able to get the VAT back but now the varying - and opposite - advice from VAT man and VAT girl ammounts to 'no you cant' We are begining to think that the VAT office dont know their own rules.

So, we would appreciate any advice on how to get any of the VAT back now, and in the future.
Richard Valentine

Richard Valentine

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Great advice. Will act on it.
Thanks, Marc & Mark. As always, the solution is so obvious once you know what it is - apart from the calculation. The nursery is going like a dream so although we hadn't intended yet, we will be doing photos very soon - and you've got our creative juices going for more vatable services. Many, many thanks.

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A word of caution re: Mark's suggestion
Richard

Mark's suggestion has merit in that some VAT will be recoverable, however, where a business makes both taxable and exempt supplies it will need to operate a partial exemption method to determine how much of the VAT incurred can be deducted. In very (very) simple terms if taxable turnover is £5000 per annum and exempt income £20000, the recoverable amount of VAT will be 20% (5/25).

Regards

Marc

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Why not make a taxable supply??
You could always make a taxable supply by taking commissions from photographers or selling taxable goods to parents and then do a voluntory registration and claim the VAT back on all set-up expenditure.

We checked with HMRC and they said as long as you make taxable supplies you can register and reclaim back your VAT in the normal way.

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Are you a charity or a state regulated welfare institution?
If so, your services will be exempt from VAT under Item 9 (and Note 6), Group 7, schedule 9, VAT Act 1994 and so you would be unable to register for VAT or reclaim VAT on costs. The flip side is that no VAT will be due on your fees.

It would help to understand your particular set up to advise better.

Regards

Marc

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Thanks, Marc. Ofsted applies
so that probably makes us a State Regulated Welfare Institution.

Although we can't spot a benefit, but just in case there is another angle, its worth telling you that we set the business up as a limited company. We have another limited company though in a different line of business and operating independantly.

Many thanks for your advice.

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