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Flat Rate Vat Pub %

Flat Rate Vat Pub %

I have a client that has been given an option to invoice a % of a pubs weekly takings.  They are currently managing the pub as employees.  In exchange for this they will need to take all the staff onto their books and invoice the % through a Limited Company.  The wages will pretty much be their only overhead, as the main pub co will continue to supply the alcohol and cover the marketing costs.  They will need to register for Vat.  The scheme has been sold to them that they can make money on the Flat Rate Vat scheme.  

My question is what rate should they use.  The HMRC guidance sheet says "Public Houses however managed" are 6.5%.  However, the only cost they will have is salaries, so is it fair to put them on at this rate?  Or should I choose 12% being "any other activity not listed"?

I have tried phoning three different Vat Helplines / Registration centre and they say they cannot advise.

My fear is choosing 6.5% then later getting investigated and finding that it should have been a higher rate.

Does anyone know if there is an HMRC number that I could call or any experience of this as to what % to choose?

Thanks

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02nd Mar 2016 15:52

you have entered

a grey area whereby the clients "run" a pub but do not purchase any stock and the owner divests himself of any PAYE liability (pensions etc)  - a very iffy scenario in my view. The pub flat rate scheme percentage is meant for publicans who buy stock at full rate so your fears are well founded.

 

 

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02nd Mar 2016 15:59

Management services

It sounds more like they are supplying management services to the pub rather than running the pub themselves. That is more likely to produce a result more in keeping with their actual activity.

I would note that you can use a rate HMRC later judge is wrong without penalty, as long as your choice was reasonable. Given you have doubts already I don't think you want to run with that argument though.

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02nd Mar 2016 16:01

Indeed, it is clear the owner is "de-risking" from pensions sick pay etc.  So, I should err on the side of caution and use 12% then as far as you are concerned.

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02nd Mar 2016 16:27

pubs

Pubs are the only business we deal with. What you describing is a "pub manager" they are neither the leaseholder,tenant or freeholder Pubcos normally use the services of management companies to keep the pub trading and this is how the management company will pay their operators.

They normally get paid around 20% of the pub turnover net of VAT and as you say have to pay all the staff. It is just a cheap way of employing pub managers .

 

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02nd Mar 2016 16:29

Thanks In a Daze.  So, do you

Thanks In a Daze.  So, do you register the "pub manager" as 12% Flat Rate Vat then, or do you use the 6.5%?

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02nd Mar 2016 16:49

Pubs

I have never dealt with a situation where the managers will earn enough to be VAT registered from my understanding of the 6.5% rate it applies to business owners who employ a manager or own the pub. so  my suggestion is 12%

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03rd Mar 2016 14:16

I agree 12%

We have several clients in this position. 6.5% felt uncomfortable to me so I took advice from a VAT specialist. Their opinion was that HMRC would view this as an unreasonable choice of rate.

In a Daze - one of ours has a turnover well into 6 figures. They still spend nearly all of it on staff though!

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03rd Mar 2016 18:18

Thank you.  That is very

Thank you.  That is very useful andrew55.  Yes, I must admit 6.5% would seem a little punchy.

On a separate note do you clients only get Employers Liability insurance, or do they get the whole Public Liability etc?  The Main Pub Co are saying that they will keep all the existing insurances in place, so my client only needs to get EL.  This feels a bit scarey to me relying on someone else's insurance.

 

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03rd Mar 2016 18:49

insurance

You will have to read the agreement your client has signed. Pubcos like Marstons state that the manager has to pay for all insurance costs. Although my clients all own their pubs I have seen some of these contracts and they really do take the P****.Breweries are crying out for decent managers and people can earn £30-£40k.

You will more than likely find they are responsible for:

Till ShortagesStock ShortagesTheft for example glassware 

 

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