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VAT on Sales of Gym Equipment

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We are a Leisure Centre registered as a Charity Trust. When buying Gym Equipment we are unable to claim any VAT as we do not charge VAT on any Gym sales.

When we now sell Gym Equipment, do we need to charge VAT?

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chips_at_mattersey
By Les Howard
12th Aug 2019 14:57

Why do you not charge VAT on 'gym sales'?

If you cannot claim VAT on something, your subsequent sale is VAT exempt. (Unfortunately HMRC provide no guidance on this exemption!)

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Replying to leshoward:
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By shosk
12th Aug 2019 08:56

I have read about subsequent sales being exempt when for car sales, does this apply to the sale of any type of goods?

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RLI
By lionofludesch
12th Aug 2019 16:30

leshoward wrote:

Why do you not charge VAT on 'gym sales'?

If you cannot claim VAT on something, your subsequent sale is VAT exempt. (Unfortunately HMRC provide no guidance on this exemption!)

Margin Scheme, Les ?

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RLI
By lionofludesch
09th Aug 2019 19:31

Question One

Are you registered for VAT ?

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Replying to lionofludesch:
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By shosk
12th Aug 2019 08:57

Yes we are registered & claim VAT at a partial exemption rate.

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By Jdopus
12th Aug 2019 08:44

You really need to speak to your own accountant on this. Your post shows quite a few misunderstandings of how VAT operates in only a few sentences and I would be concerned that leisure centres usually have quite high turnover. The cost of handling this incorrectly could be enormous - get an accountant.

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Replying to Jdopus:
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By spidersong
12th Aug 2019 14:07

Whether they are misunderstanding or miscommunicating may be the question.

If they're a charity then it's no misunderstanding that supplies of sporting services are likely exempt...IF their phrasing of gym sales means 'gym attendance/membership'.

Likewise they wouldn't be able to recover VAT on equipment (weight machines, treadmills) they buy for their members to use in the gym if their 'gym sales' are exempt.

So potentially all they've misunderstood is the liability of onward sales of used equipment, which is what they've asked about.

However if 'gym sales' and 'gym equipment' means 'we're buying in towels, mats, sports drinks, and small weights for resale to our members and not charging VAT' then I'd agree with you - they've screwed up and need to review their sales ledger and their PE calcs as a matter of urgency.

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Replying to spidersong:
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By shosk
12th Aug 2019 14:27

Any goods we sell within the leisure centre, such as Swimming Googles, we charge VAT on.
The item in question is an old Treadmill we are now selling, i believe this should have VAT on when selling regardless of whether we claimed VAT on the item when we bought the item. Thanks for your comments.

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chips_at_mattersey
By Les Howard
12th Aug 2019 14:59

As above, if you claimed no VAT on its purchase, then the sale of the treadmill is exempt.

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By shosk
12th Aug 2019 15:03

There would have been VAT on the original purchase, we were just unable to re-claim it. Now we are selling the treadmill the equipment surely is still a vatable item?

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By lionofludesch
12th Aug 2019 15:28

Not sure why you persist - but feel free to pay VAT if you wish.

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Replying to shosk:
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By spidersong
13th Aug 2019 11:33

As Les says the onward sale is exempt: what you're looking at is Group 14 of Schedule 9 of the VAT Act 1994, the schedule sets out those things that are exempt from VAT and this is the text of Group 14:
"A supply of goods in relation to which each of the following conditions is satisfied, that is to say—(a)
there is input tax of the person making the supply ….(b)
the only such input tax is non-deductible input tax"

So yes there was VAT (Input Tax) on the treadmill [part a] that you bought but that VAT was non-deductible by you [part b] (incidentally note 4 in the group confirms that non-deductible includes purchases that weren't at the time and didn't become deminimis for Partial Exemption).

So the sale of the treadmill falls under that description and would therefore be an exempt supply. The sale of anything expressly bought for resale (making taxable supplies) would have been recoverable, hence why you charge VAT on goggles etc.

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By fawltybasil2575
13th Aug 2019 13:11

@ shosk (OP).

Here is a link to the legislation to which spidersong (11.33 post today) has kindly provided a link:-

https://www.legislation.gov.uk/ukpga/1994/23/schedule/9

Your seeming disbelief that the sale of the Gym Equipment is exempt, in these circumstances, is IMHO understandable, albeit incorrect: especially so since, as Les pointed out in his first post, the HMRC guidance apparently omits to include this type of disposal in its listings of exempt outputs.

For the avoidance of doubt, a key fact is that the purchase of the Gym Equipment DID include VAT, but that such VAT was NOT "deductible". If alternatively that purchase either:-

(i) Did not INCLUDE VAT, or

(ii) Did include VAT which you elected NOT TO RECLAIM,

then the sale of the Gym Equipment would be standard-rated.

[For completeness only, in the scenario per (i) above, the optional application of the margin scheme might have been advantageous].

Basil.

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chips_at_mattersey
By Les Howard
14th Aug 2019 16:57

As you can see, VAT is complicated. You should seek further advice, not just on (1) should I charge VAT? but on (2) what other options are open to me to make the organisation more VAT efficient?

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