Welcome to this quarter’s VAT blog highlighting some of the most common queries we’ve answered lately.
- Can the supply of dance classes and examination services by a company to private individuals be treated as exempt for VAT purposes?
- What are the differences when you are selling goods to VAT registered businesses versus non-VAT registered customers within the EU and outside the EU?
- Can you reclaim the VAT element on staff entertainment?
Can the supply of dance classes and examination services by a company to private individuals be treated as exempt for VAT purposes?
For any education that is being provided for a charge and does not classify as an eligible body (such as schools or non-profit organisations), VAT will be charged in the normal way at 20%. However, in some cases this could be treated as an “exempt supply” if the training or classes are supplied by a sole proprietor or partnership. The supply of examination services is usually exempt if provided by an eligible body (such as schools, colleges or government departments).
What are the differences when you are selling goods to VAT registered businesses versus non-VAT registered customers within the EU and outside the EU?
For the sale of goods to customers who are VAT registered in the destination EU country, the business can zero-rate the supply providing:
- the goods are dispatched from the UK to another EU country within three months; and
- “evidence of removal” is held.
The business should also ensure that its customer has a valid EU VAT number which should be displayed on the sales invoice and will be required in order to complete their EC Sales List.
For the sale of goods to non-VAT registered customers in other EU countries, UK VAT must be charged and accounted for just the same as sales to UK customers. However, each country has a “distance selling threshold,” therefore if the value of sales to that country breaches the threshold, the business must register for VAT in that country and charge its normal rate of VAT on sales.
If goods are exported outside the EU, UK VAT is not charged and the sale can be zero-rated providing evidence of export is held and the goods are exported within three months of sale. (This may be longer for certain goods.)
Can you reclaim the VAT element on staff entertainment?
Staff entertainment costs are recoverable, provided the costs are business-related and for staff only. Various scenarios can make this a little more confusing for businesses. Here are a few points to consider:
- Employee party – where only employees attend a staff party, the input tax is fully recoverable.
- Where directors or partners attend as well as the employees this is also recoverable.
- In some instances, clients or other non-employees might attend the party. In this case, the input tax would need to be apportioned, as the business would be unable to claim input tax on the costs relating to the non-employees.
- Directors’ and partners’ entertainment – HMRC deems this supply as “not for the purpose of the business” and so the input tax is blocked from recovery.
We’re always happy to clarify your VAT queries, so please feel free to get in touch with our VAT team today.