VAT Partial Exemption

VAT Partial Exemption

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I am preparing a VAT return for a Sports Club. During the period they have spent a large amount on ground improvements. As this relates to the Playing Side of the Club (Exempt), they will not be able to claim the VAT on this invoice. The Club received a grant for the exact same amount of this invoice including the VAT. Usually the Club can claim the VAT input on the exempt goods/services as they are under the de-minimus of £625 per month and 50% of Input Tax, as the Club also run a bar and therefore most of their supplies are taxable. But this invoice will completely fail the de-minimus in this quarter and when we come to do the annual adjustment at the end of the year.    This will therefore make all other exempt supplies and the residual amounts non-claimable for this quarter and the next three quarters.  This will probably cost the club between £1,500 and £2,000 over this period. Is it possible to not even put the invoice into the partial exemption calculations, and therefore not jeopardise the other exempt input tax, which will clearly be under the de-minimus level.  Or am I just clutching at straws?

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By spidersong
07th Sep 2015 12:23

straws

I'm afraid if people could pick and choose which invoices to include in their partial exemption calculations we'd find that everyone only had £7499 exempt attributable Input Tax a year and a lot of 'other' non-claimed VAT sitting around.

However following on from the Chester Zoo case (can't remember the actual name; it's run by the Northern England Zoological society or something like that) and the Roald Dhal museum case, which both expanded what could be treated as 'pot' costs rather than direct exempt costs, is there anyway of getting the improvements into the pot rather than directly attributable?

e.g. do social members watch the games that go on, or sit in the grounds, etc. You may be able to increase recovery a bit by this method but it will depend on your appetite for arguing with HMRC as they will almost certainly take the view that the grounds maintenance isn't an overhead cost.

 

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By Portia Nina Levin
07th Sep 2015 12:37

@ spidersong

Might there be any advantages in opting to tax the facilities in these circumstances? I am not familiar with such situations, nor whether it is viable.

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By Robert K
07th Sep 2015 12:51

Social members do watch the games but obviously they are not on the field of play. Barriers are up to stop the crowd encroaching the playing area whilst the games are played. The only time Social members may use the pitch is if the Club holds other events such as Fun days, but the Club will probably want to protect the playing area, so doubt this will be used for this purpose in the future.

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By MBK
07th Sep 2015 13:02

You need to create just one taxable supply.

If you can create just one taxable supply of the playing facilities in the VAT year then the input tax can go into the "pot" (ie non attributable) part of the calculations and at least some of it will be recovered.

So, for example, with golf clubs, there is always a need to have one corporate day - because if the golf course is hired to a company the supply is no longer exempt. With a bit of thought it may be possible to do something similar in your case.

 

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By shaun king
07th Sep 2015 16:20

North of England Zoological Society Appeal.

Following on from Spidersong's e mail I suggest you look at the above case Decision TC 04479 as I would be inclined to argue the VAT incurred in improving the playing facilities is in part attributable to the revenue derived from beer and food sales. For example if more people watch the match then there must be an increase in bar sales etc.

I could develop the argument further for you but that would be selling the family silver - so good luck.

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