Exempt supplies and VAT registration

Exempt supplies and VAT registration

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If a business only makes supplies which are outside the scope of UK VAT can it still register for VAT voluntarily (if turnover is below the VAT threshold) and recover VAT on its costs?

I'm not sure if supplies outside the scope of VAT are the same as Exempt supplies?

Replies (6)

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chips_at_mattersey
By Les Howard
06th Oct 2015 10:40

Non-taxable supplies

If a business only makes supplies which are outside the scope of VAT, it cannot register for VAT. There are exceptions for certain supplies made outside the EU, but that would still be taxable or exempt supplie sif made in the UK.

But I do wonder what supplies it makes?

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By cheekychappy
06th Oct 2015 10:45

If the supplies are outside the scope, then you can register for VAT. Any input tax is therefore reclaimable.

Paras 10(1) to 10(4) of Sch 1 VATA 1994 is your reference.

 

To clarify, outside the scope is not the same as exempt. If your client is making only exempt supplies, it is unable to register for VAT.

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Replying to Cheshire:
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By happy
06th Oct 2015 11:20

Thank you

cheekychappy wrote:

If the supplies are outside the scope, then you can register for VAT. Any input tax is therefore reclaimable.

Paras 10(1) to 10(4) of Sch 1 VATA 1994 is your reference.

 

To clarify, outside the scope is not the same as exempt. If your client is making only exempt supplies, it is unable to register for VAT.

Thank you I was having a moment of panic thinking outside the scope was the same as exempt.

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Replying to Cheshire:
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By happy
06th Oct 2015 11:22

Would HMRC spot this?

cheekychappy wrote:

....If your client is making only exempt supplies, it is unable to register for VAT.

Out of interest would HMRC disallow a VAT registration application it if was clear the company was only making exempt supplies (never seen or tried it myself just interested)

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Replying to Tax Dragon:
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By spidersong
06th Oct 2015 11:27

Yes

I've seen it done and done it myself (when I was the other side of the fence).

And there are plenty of applications that got queried along the lines of 'you've said you're doing £80K of taxable supplies but your only activity seems to be exempt why is that?'

EDIT: Sorry this should have quoted the query on whether registration were refused if only making exempt supplies - but that seems to have not been picked up.

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By spidersong
06th Oct 2015 11:23

To clarify...

it's what Les said, rather than the more blanket assurance from Cheekychappy, although his reply does point to the correct parts of law it misses the important caveats Les gave.

So if it's a UK charity making outside the scope supplies (non-business) in the UK then it cannot register and cannot recover Input Tax. If it's making supplies outside the scope because they are in the course of business but take place in another country and would be taxable (or certain exempt ones) in the UK then it can.

See this section of the VAT Registration Manual: http://www.hmrc.gov.uk/manuals/vatregmanual/vatreg23100.htm 

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