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Karate teacher using subcontractors/helpers

Does VAT exemption still apply?

Good afternoon,

I have been approached by a potential client, H&W karate teachers trading as a partnership. The classes are either taught by the proprietors on their own, or they sometimes teach alongside another qualified teacher or helpers. They have been treating their supply as exempt.

Reading the VAT education manual I am unsure the VAT exemption applies - it states

In principle, private tuition is exempt when supplied by either a sole proprietor or any member of a partnership. The exemption does not extend to instruction delivered by anyone employed or engaged to help. In these circumstances, the sole proprietor or partnership may opt to use any fair and reasonable method to apportion their supplies between exempt and taxable elements. If this is impractical, they may treat all their supplies of tuition as taxable, regardless of who actually delivers it. If a sole proprietor or partnership employs or engages others in a non-teaching capacity, this has no effect on the liability of the tuition they themselves supply.

So here the instruction is not "strictly" delivered by someone else, but neither are the helpers in a non-teaching capacity. Would you say the supply is exempt?

Thanks for your input!

 

 

Replies

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07th Nov 2017 15:14

It's not exempt. Not wholly exempt, anyway.

With our attention merely on the italicised words, I would say you need to be travelling along the "just and reasonable apportionment" route.

This is a difficult area and I'm taking it that this is the only point on which you're unsure.

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to lionofludesch
07th Nov 2017 15:22

Thank you for your reply Lion.
They were VAT registered but after taking specialist VAT advice a few years ago they were told their supply was exempt and didn't have to charge VAT. Hence my question.

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to Chipette
07th Nov 2017 17:01

Did they have any employees at the time ?

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to lionofludesch
07th Nov 2017 17:11

Yes, similar set up - not employees but subcontractors

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By Matrix
to Chipette
07th Nov 2017 18:26

I would ask for a copy of the specialist advice and check the facts. However I am surprised that such a business is trading above the VAT threshold and that the business was still sustainable when it was VAT registered.

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to Matrix
07th Nov 2017 21:26

Thanks Matrix.
Yes surprised too that turnover is almost twice the VAT threshold -they provide other services (kids parties, selling kit etc..) that would otherwise be VATable but from what I understand under the threshold. However now that it seems some of the exempt supplies are not in fact exempt this needs to be looked at closely.

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to Matrix
09th Nov 2017 12:36

I had another conversation with them. Interestingly the view taken by the specialist was that as the owner is doing the teaching the helpers act in a non-teaching capacity.

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to Chipette
09th Nov 2017 13:12

Is there some reason why you've come to a bunch of numpties off the internet to query the advice that your client has properly taken from a VAT specialist - whom I assume is adequately insured- when nothing has changed since the advice was given.

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to Portia Nina Levin
09th Nov 2017 13:57

I have an inquisitive mind ;-)

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to Chipette
09th Nov 2017 14:06

Not what I was expecting.

Is your chief weapon surprise. And fear. And ruthless efficiency. And a near fanatical devotion to the Pope.

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07th Nov 2017 19:01

HiiiiiiiiVAT!

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to AnnAccountant
09th Nov 2017 13:11

Ouch!

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13th Nov 2017 10:07

I have a client in a similar situation, although not deemed that the subcontractors were non-teaching staff. The client in question is aware that they have to assess their income on a regular basis to ensure that the taxable supplies themselves do not exceed the VAT threshold.
We have the original decision from HMRC in writing on the file with the proviso above.

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By djn24
13th Nov 2017 14:20

Chipette wrote:

In principle, private tuition is exempt when supplied by either a sole proprietor or any member of a partnership. T

I'm amazed that this advice was given. I can't see how this would be classed as eduction. Notice 701/30 chapter 6 says 'the subject is one taught regularly in a number of schools or universities'.
Now I did Karate for 6 years and would say that it would not qualify under this.

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to djn24
13th Nov 2017 15:00

djn24 wrote:

Chipette wrote:

In principle, private tuition is exempt when supplied by either a sole proprietor or any member of a partnership. T

I'm amazed that this advice was given. I can't see how this would be classed as eduction. Notice 701/30 chapter 6 says 'the subject is one taught regularly in a number of schools or universities'.
Now I did Karate for 6 years and would say that it would not qualify under this.

You'd be surprised. Motocross is taught regularly in schools, apparently.

But only in Norn Iron.

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to djn24
13th Nov 2017 15:16

I suggest you read the words under the heading Sport and Physical Education here:
https://www.gov.uk/hmrc-internal-manuals/vat-education-manual/vatedu40200

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By djn24
to Portia Nina Levin
13th Nov 2017 15:40

Portia Nina Levin wrote:

I suggest you read the words under the heading Sport and Physical Education here:
https://www.gov.uk/hmrc-internal-manuals/vat-education-manual/vatedu40200


It says that as long as it meets all other conditions. Notice 701/45 say eligible bodies which this isn't.
Following on from your logic that would mean that 'teaching' people on fitness classes, keep fit dance,classes, boxing etc would all be the same. I can't help but think this makes no sense.
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to djn24
13th Nov 2017 15:55

It doesn't need to be an eligible body, for the private tuition exemption to apply. If you're going to take the time to read a VAT Notice, read it properly, so that you understand what is said.

What you think doesn't really matter, does it? All those things are regarded as subjects ordinarily taught in schools. So far the list of things that have not been so considered by tribunals are belly-dancing, yoga and pilates. We now also have it official that bridge isn't a sport.

In more interesting news, my Spanish lessons and cookery classes are VAT-free!

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By djn24
13th Nov 2017 15:44

Karate is not normally taught in schools.
It's usually in community halls, industrial units etc.

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to djn24
13th Nov 2017 16:43

Where it's normally taught is irrelevant.

The test is whether it's ordinarily taught in schools. If that test is fulfilled, it wouldn't matter by how much commercial teaching outnumbered it.

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to lionofludesch
13th Nov 2017 16:47

You missed out an important word. The test is whether it's a *subject* ordinarily taught in schools or universities. And HMRC and the tribunals accept that the *subject* that is being taught is the wider *subject* of physical education.

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to Portia Nina Levin
13th Nov 2017 16:55

Noted and agreed.

Although it wasn't quite the point I was making.

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14th Nov 2017 09:27

So they were charging VAT then after advice they stopped charging VAT.

A case of Tax on, Tax off.

I loved the Karate Kid movie.
I'll get me coat.

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By djn24
16th Nov 2017 14:50

"What does ‘ordinarily’ mean?

A reasonable test for ordinarily is whether the subject is taught in a number of schools or universities on a regular basis. In practice, the vast majority of structured courses delivered by an individual teacher are likely to meet this criterion.
What does ‘subject’ mean?

Private tuition is only considered to be in a subject ordinarily taught in a school or university if it is analogous to what is actually taught in a number of schools or universities. It does not have to be identical to a course provided by a number of schools or universities but should be of a similar nature and level.

Sporting and recreational activities {.filledcircle}

Instruction and coaching in sporting and recreational activities qualify as exempt private tuition, provided that the supply meets all the other necessary conditions."

Instruction will be exempt if it meets all the other necessary conditions. Looking at the above it appears to not meet those. It is not a course usually taught in schools or even similar. That's my reading of it.

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to djn24
16th Nov 2017 15:03

Physical Education isn't taught in schools ?

When did it stop ?

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By djn24
to lionofludesch
16th Nov 2017 20:31

Karate isn't physical education though is it?
This is usually taught outside school by a paid instructor or in smaller clubs unpaid.

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to djn24
16th Nov 2017 22:11

It's an eccentric view but I accept your right to hold it.

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