Our VAT registered company intends to start buying VAT exempt supplies from a charitable organisation and resell the same to the members of the public.
The public can buy the service (VAT exempt) directly from the charitable organisation say for £30 or from our company for £45. The supplier (test provider) of this service has indicated that they will sell to us at the same price they sell to individuals but we are at liberty to add a mark up on the service.
Question: When we resell this service, are we required to charge VAT on £30 (VAT exempt cost) or should we only charge VAT on our margin? In other words, should the whole £45 (our selling price) be VAT inclusive?
Your suggestions/opinions will be greatly appreciated.
Regards
Ellyxris
Replies (3)
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What is it?
Firstly marginal accounting only applies to second hand goods, and tours, so you'll be accounting on all or nothing so long as this is a single supply.
But it's impossible to give an opinion on the liability of a supply if we don't know what it is. It's also unlikely to be exempt anyway as exemption would apply to supplies of land (£30 a pop? seems unlikely), financial services, burial and cremation, insurance, betting and gaming, investment gold none of which seem common charitable trading.
I suppose it could be welfare, education, health, or sporting services which charities do commonly provide, but most of these don't lend themselves to a resale structure. So I'd think it more likely a zero rated supply.
Actually looking at it again does the "(test provider)" comment indicate that the supply is educational, or was it menat to indicate that this is the supplier you're initially trying out the service with?
If you are reselling an examination or something, then is it a recognised exam?, who are the awarding body?, who marks the test?, what will you actually be doing for the money, providing a bit of paper for someone to tick answers, or awarding a qualification?
For zero rating or exemption, whichever it may prove to be, much depends on the status of the provider, i.e they're only exempt/zero rated when supplied by charities, but this doesn't apply to them all (indeed some rely on the status of the recipient, or both the provider and recipient), so without knowing what you're actually doing no one will be able to give much definitive advice.
VAT on resale of exempt supplies
From what you say, I think the charity may be an 'eligible body' (sse Notive 701/30, paragraph 4) and treat the test as exempt from VAT because it is the supplier. If a body that is not an eligible body supplies the test, it is not exempt from VAT.