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Outside the scope VAT box 6

Outside the scope VAT box 6

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Hi all,

I've found so much conflicting info about this on the HMRC website so hoping someone can clarify.

My client is a restaurant and has given me sales info including tips listed separately. These are optional tips not mandatory service charges. The business does not hand these tips over to the staff (bit mean) but keeps them. It's my understanding that this income is outside the scope and therefore not VATable but should they go in box 6?

Many thanks in advance.

Replies (13)

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By Duggimon
12th Feb 2016 10:14

I never include anything that's outside the scope of VAT in the totals on a VAT return. Box 6 and Box 7 aren't really important though, so long as boxes 1-5 are correct so I wouldn't be losing sleep over it.

Thanks (1)
Teignmouth
By Paul Scholes
12th Feb 2016 10:21

Yes

Box 6 should include OTS transactions, see 3.7 of VAT 700/12. The main exception is FRS VAT returns.

 

 

Thanks (1)
RLI
By lionofludesch
12th Feb 2016 10:45

Clarify ?

Paul Scholes wrote:

Box 6 should include OTS transactions, see 3.7 of VAT 700/12. The main exception is FRS VAT returns.

Can you clarify that, Paul ?  I can only find a reference to supplies outside the scope because of the Place of Supply rules.

Thanks (1)
By Duggimon
12th Feb 2016 10:31

Isn't that just if it's out of scope under 741A rather than anything out of scope?

Thanks (1)
Teignmouth
By Paul Scholes
12th Feb 2016 10:41

Sorry

Yes you are right.  I've spent so much time looking at the place of supply stuff and the VAT returns that I've lumped all OTS into one basket.

Thanks (1)
RLI
By lionofludesch
12th Feb 2016 10:45

Don't worry

OP - don't worry.  No-one's looking at Box 6 anyway.

Thanks (1)
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By mark burke
12th Feb 2016 12:28

Outside the scope VAT Box 6

I would suggest it depends why the income is outside the scope of VAT.

If it is because of the place of supply rules then it should be included as it still represents consideration received in return for making a supply in the course of the business (that would be a taxable supply but for the place of supply rules).

If it is ouside the scope because it does not represent a supply (grants, donations etc) then it should not be included in Box 6.

 

 

Thanks (2)
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By Anonymous123
15th Feb 2016 09:39

Thanks everyone, I shall omit the tips from box 6 with confidence now :)

Thanks (0)
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By macaulay147
15th Feb 2016 11:46

Ethics

There must be some ethical issue doing work for a restaurant that doesn't pay out the tips received to its staff!

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By birdman
15th Feb 2016 12:48

Box 6

Bearing in mind that I've had enquiries started because box 6 turnover does not match the accounts, can it really be treated with total disregard? The last one was a while ago - usually explained by debtors or similar.

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By ShayaG
15th Feb 2016 13:21

Am I missing something

If the staff don't receive tips and the business does then surely this is VATable income (without getting into the whole zero rated pasty tax shenanigans).

I'd be very surprised if you can avoid tax simply by describing income as tips, when in substance (and presumably in financial statements accounting) it is revenue for the restaurant not the staff.

Is there some source for Out of Scope treatment?

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By Anonymous123
15th Feb 2016 16:02

I know it doesn't seem right...

I already put my foot in it with the client by telling him quite confidently and firmly that if the tips weren't going to the staff then it would be considered VATable income. Then on further investigation I found it to be outside the scope and had to go back to him with my tail between my legs...

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