Avoiding VAT by Gifting work from a PArish Council to an unincorporated club

Avoiding VAT by Gifting work from a PArish...

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My tennis club rents our courts from the Parish Council on a full repairing lease. The courts are due to be resurfaced shortly at a cost of £30k. Can the Parish Council, as landlords, pay for the work, reclaim the VAT and then "gift" the new surface to the tennis club, thus avoiding VAT completely? 

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By spidersong
27th Aug 2015 11:10

Depends for whom...

They can do that and avoid the tennis club incurring any VAT, however it probably won't stop them suffering it.

A Parish Council is a local authority and so under Section 33 of the VAT Act can recover VAT both (if registered for VAT) on its taxable business activity and its non-business activities. (If its not registered then its non-business only)

Unfortunately rental of property is not a non-business activity, in most cases, unless the only rent is a peppercorn. So if there's any form of rental payment then assuimng no option has been exercised its an exempt business activity and so that's £6000 against their partial exemption limit, now that may be below deminimis for them in which case they'll get it back.

So 3 paragraphs in and a raft of assumptions and questions, so before I bother going further:

What's the basis of the rental: commercial (how much?) or peppercorn?

How are the courts used: does the club have exclusive use, is there community use at certain times etc.?

What's the PC's deminimis position likely to be?

What basis is the resurfacing funded on, is the PC paying for it, is the club paying for it, is the club planning on passing funding to the PC in your proposed arrangement, is there a grant being provided for the work and if so who from, who's applied for it, and who's receiving the money?

Is there an option to tax on the courts?

Is the PC registered for VAT due to its taxable activity or is it a pure Section 33 claim we're looking at?

Have you asked the PC?, in my experience lots of PCs are very risk averse when it comes to setting up arrangements to avoid VAT and might not be willing to go forward with the set up you're proposing

 

However having seen lots of these types of questions over the years relating to avoiding VAT by using Local Authority 'partners', my gut feeling just from the fact the question is being asked is that you're unlikely to be able to avoid the VAT. But if you get the answers to some of the above then maybe we'll see what possibilities are there.

 

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By bernard michael
27th Aug 2015 10:14

I know of  a similar

I know of  a similar situation where the PC paid and claimed back the VAT but is now scared that even after 4 years HMRC may claim it back as it apparently has done in the past.Consequently the funds remain on deposit and unused Unfortunately I cannot see the papers to find out how the reversal happened

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