A childrens' adventure park (with onsite shop and restaurant) charges an admission fee, however over the year around 5% of visitors are given complimentary admission for free.
I understand that in scenarios where services are given away for no consideration, no supply has deemed to have taken place and no VAT is due - the services are not bought in, and there are no marginal costs of each free admission, so no output VAT charge arises.
However, does this have any effect on the ability to recover input VAT incurrred on general overheads (site maintenance costs and the like)? Could HMRC argue that 5% of input VAT on overheads is irrecoverable?
Replies (8)
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Yes, HMRC could argue that 5% of the activities are non-business and disallow input tax to that extent.
Does the reason why free admission is given make any difference? For example, is it one “free” ticket for parties of 10 or more?
I would think the reason *why* 5% of visitors are given free admission is paramount.
Is it simply at the whim or whomever is in the ticket booth that day?
Are the 5% of visitors by coincidence friends and family of the directors?
Is free entry some sort of prize draw prize or a loyalty scheme?
Of the 5%, about 1/3 are staff and their friends - a perk of the job. The remainder is promotional admissions for tour ops, coach companies and suppliers etc.
Would have thought staff benefits and promotions were business purposes although I’m not sure what the VAT test is.
Inclined to agree with David Ex. Staff discounts are rarely held to be a benefit in kind for income tax, especially as here, where the marginal cost is negligible. Obviously VAT is not the same thing - and why should different branches of HMRC be wholly consistent.