Sense check please - VAT FRS

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Ive posted as anymous and changed a few details as the previous accountant may recoginse my name!

A new client owns a gym and is on the VAT FRS, when Ive reviewed the workings the previous accountant has deducted off any payments to freelance personal trainers before calculating the VAT due.  When queried with the client its because "the personal trainer session money recevied is for them and not the gym" however they do make a markup on their services eg £25 per session and £15 paid to the trainer.

Am I correct in thinking that the VAT should be calculated on the full amount and not deduct the personal trainer payments?

 

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By carnmores
12th Jan 2021 14:32

you need to see the contract, if any, between the PTs and the gym as well as possibly between the gym and the members

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VAT
By Jason Croke
12th Jan 2021 16:34

Its possible the gym acts as agent between member and trainer, so the member pays the gym £25 but that £25 is the PT's income,. the gym only colelcts it as agent, the gym then hands the £25 over to the PT minus the gym "agency fee" of £10.

So in that scenario, there'd be an invoice for £10 from gym to PT trainer, the agency fee would be plus VAT of course, so netting off the £25 from the £15 and then applying VAT would make sense, IF the gym is an agent.

If there is no agency agreement, HMRC could take a view that the gym is making the sale in its own name and the £25 should be subject to VAT by the gym and then the gym sub contracts the training out to a PT.

Contracts are absolutely critical here or at least a clear indication of what the gym is doing (collecting money as agent or acting in own name as principal).

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