[Trevor S]

In this reply, I’m assuming that there is no contractual relationship between the couples and the external editor or filmmaker subcontractors – and that the couples are your customers, and you are the editor/ filmmaker’s customer.  If the contractual arrangements differ to this, it could impact on the answers.

Quote:

If an editor has previously worked for us and submits an invoice pre VAT registration, then we just pay, which is fine. What happens when they register for VAT.

Whether a previously agreed price is deemed to be the VAT inclusive or VAT exclusive value is purely a contractual matter – it is not covered by VAT legislation. Ideally the contract will quote fees as something like “£x, including VAT if applicable” or “£y, excluding VAT”. If the contract makes no mention of VAT, you’ll need to reach agreement with the editor.

Quote:

We would then claim this VAT back?

Depends on whether (a) you are VAT registered and (b) the charges you make to your customers attract VAT. If the answer to both is “yes”, you’ll be able to reclaim the VAT charged by the editor. As usual, you’ll need them to give you a valid VAT invoice.

Quote:

What if we as the main Company take a wedding booking from a private couple who are obviously not a business and not VAT registered.

This is a separate transaction. If you are already VAT registered, you should already be charging VAT to your customers on the full amount they pay you, regardless of whether the editor you use is VAT registered.
But if you’re not VAT registered, you won’t be able to reclaim the VAT that a VAT registered editor charges you. It would become part of your costs. You would then need to decide whether you absorb that going forward or increase your charges to future customers to cover it.

Quote:

What if we engage one of our sub contractors Filmmakers to undertake that wedding for an agreed fee but they then become vat registered.

Much the same issues as if an editor VAT registers. What does your contract with the Filmmaker say – are they entitled to add it to their existing fees or are they required to take it out of their existing fees? If the contract doesn’t clearly specify, you’ll need to reach agreement with the Filmmaker.

Quote:

Would we as the main Co, who originally took payment from the client (Wedding Couple) have to now pay the Vat off the suppliers invoice? I would assume it cancels itself out as we would claim the VAT back?

Again, the same position as with the editor example. You can recover the VAT if you’re VAT registered and you have a proper VAT invoice from the filmmaker – which means that it’s no extra cost to you.

Hope this helps!

[Trevor S]

Assuming that you’re only supplying your services to the UAE company (and not making supplies direct to the potential customers in the UK / Ireland) the place of supply is in the UAE. This means that it falls completely outside the scope of the UK VAT system – although I don’t know what (if any) obligations you may have in the UAE.

The second reference you’ve quoted is part of the section on zero rating. The zero rate is technically a rate of VAT, so only needs to be considered for transactions which fall within the scope of the UK VAT system. It therefore doesn’t impact on your supplies.

For completeness, I think that the zero rating is actually clearer in the legislation than the guidance! It’s here: https://www.legislation.gov.uk/ukpga/1994/23/schedule/8/part/II/chapter/7 Essentially what it covers is an intermediary helping a UK business supply services to overseas customers. The intermediary’s services would be subject to VAT were it not for this zero rating, as their customer is based in the UK. 15.4 is effectively pointing out that the zero rating only applies where the intermediary’s UK based customer is supplying their services to an overseas (rather than UK based) customer.

[Trevor S]

Thanks for the update!

[Trevor S]

Yes you’re right – the net error will be zero, so you can adjust on the VAT return.

[Trevor S]

A key difference between C79 and PVA is that C79 shows amounts of import VAT that has already been paid over to HMRC, and you can just reclaim on your VAT return. PVA statements show import VAT amounts that have not yet been paid to HMRC, so entries are required to both pay it to and reclaim it from HMRC via the VAT return.

I don’t know how any specific software packages would need them to be entered – but, from the VAT return perspective, it’s very similar to the reverse charge on services.  The VAT figures need to be included in both box 1 and 4.

The adjustment should be done in the return for the period covered by the statement. I don’t know what months each of your VAT return quarters cover, but if you have statements going back to August, some will now be late. The normal rules in section 4 of HMRC’s notice 700/45 apply – regarding whether the correction can be done on the next return, or needs to be notified on form VAT652. Generally errors under £10k can be corrected on the next return, with higher limits (up to £50k) applying to larger businesses.

Do you know for certain that August 2021 was definitely the first? The system will only let you download the last six months statements, older ones have to be requested (see: https://www.gov.uk/guidance/get-your-postponed-import-vat-statement#if-you-need-a-statement-more-than-6-months-old ).

[Trevor S]

VAT is a tax on the supply of goods and services.  So if you’re just putting money into your limited company, without receiving any goods or services in return, it shouldn’t impact on your VAT return.

[Trevor S]

I’m assuming that:

• your company was the owner of the work of art, rather than being an agent/marketplace arranging the sale on behalf of the actual owner, and
• ownership has transferred to the buyer while the item was in Germany, and
• the value exceeds £135.

If so, I think the first question is whether you should charge German VAT – if you’re either already registered for German VAT, or should be as a result of this and/or other transactions. With the goods being sold in Germany, you would expect the transaction to be subject to German VAT unless you hold whatever evidence of export their tax authorities require.

I don’t see that you would be required to charge UK VAT – unless ownership of the item doesn’t pass to the buyer until it arrives in the UK.

Regarding any amount of VAT/duty payable by the buyer on import, this would be between them and HMRC.

[Trevor S]

Yes, the business must charge VAT, calculated on the amount that they sell the appliances for.  Obviously this may well be less than the VAT they recovered when they bought the appliances from the manufacturers.

[Trevor S]

Are they showing VAT on their invoices?  If they’re not registered for VAT, they shouldn’t be charging it, so there would be no VAT to recover.

The other possibility, does their charge cover more than just their time?  For example, are they incurring other costs relating to the running of the club and charging them on to you?  If so, you need to establish who those other suppliers are technically dealing with.  If the other suppliers’ invoices are issued to the couple’s company, you cannot recover any VAT.  However, if the invoices have been issued to the club and the couple’s company has just paid them on your behalf, you can reclaim the VAT shown on those invoices in the same way that you would have done had you paid the supplier directly.

[Trevor S]

The 5% rate was until 30 Sep 2021.  It has increased to 12.5% for 1 Oct 2021 – 31 Mar 2022, and is due to return to 20% from 1 Apr 2022.

HMRC’s notice 709/1 gives more detail about what is covered in connection with catering: https://www.gov.uk/guidance/catering-takeaway-food-and-vat-notice-7091

[Trevor S]

Thanks. Obviously this clause needs to be read in conjunction with the rest of the contract, but it appears to me to be more indicative of the second option in my previous post, rather than the first. Particularly if it’s you (rather than the venue) that has entered into arrangements with other ticket sellers, and decides how many are allocated to each to sell. If the venue (and other sellers) are acting as your “disclosed agent” (rather than as a “principal” in their own right) when making sales to the public, the requirement to declare VAT when those sales are made falls on you, not them. If this is the case, the venue won’t have declared any VAT on the sales, so they will calculate percentages based on total selling prices, less the costs mentioned. I assume that these are specifically excluded as they’re fixed costs to the venue which they’ll incur regardless of how many tickets they’re able or allocated to sell.  Essentially they are treating their share a bit like a venue hire (as you suspected in your original question) plus a supply of their other services to you.  But that is what you’ve agreed to in the contract.

If I’m right, then in your accounts you should be declaring VAT on the full ticket sales. The venue will calculate their share, which they’ll send you a “receipted” VAT invoice for, and the balance of the ticket sales income after deduction of that invoice. You can recover the VAT shown on the venue’s invoice via your VAT return.

I would suggest that it’s worth showing a VAT advisor the full contract to check they also interpret it in this way – given that it may well impact on the VAT accounting you’ve already done. Clearly that sort of work would be beyond the scope of a forum and your accountant may be able to recommend an advisor that they’ve worked with before. If I’m correct in my assumptions, the venue has calculated their share in line with the contract – so there’s nothing you can do about that now, but bear it in mind when negotiating the percentage splits in the future – either with that venue or any others operating under a similar arrangement.

[Trevor S]

First question in VAT is always “who is supplying what to who”. The two types of arrangement that I’ve encountered previously are:

1. Venue is the principal in the sale of tickets to the public – they collect the ticket income and pay VAT on the full sales over to HMRC. Venue then pays the production company for the show. If the production company is VAT registered, they pay the VAT on their share over to HMRC. Either they give a VAT invoice to the venue or the venue produces a self billing invoice – this allows the venue to recover from HMRC the VAT on the production company’s share.
2. Production company is the principal in the sale of tickets to the public – they collect the ticket income and pay VAT on the full income over to HMRC. Production company pays the venue owner for use of the venue. If the venue owner is VAT registered, and use of the venue is a VATable supply, they will pay HMRC VAT on their share and give the production company a VAT invoice which entitles the production company to recover from HMRC the VAT on the venue’s share.

Your post implies that it’s the first of these. But this should be documented in a formal contract with the venue, as the contract is your “proof” that you’re only required to pay HMRC the VAT on your share – rather than on the total ticket sales, as you would be under the second option above.  The contract should also be clear about the calculation method for payments – i.e. whether they’re a percentage of the VAT-inclusive or VAT-exclusive amounts.

Essentially, you don’t have a VAT issue as such, you have a contractual issue. HMRC will just ensure that you’ve declared VAT on whatever you’ve received. The calculation of the amount you receive is a matter for negotiation between you and the venue.  So check the detail of any contract, make sure that the venue are complying with the wording of it.  If the contract is vague about the calculation, you will need to find some way to reach agreement of interpretation with the venue … and make sure that it’s specified more clearly in future contracts.

[Trevor S]

You do need to consider the different taxes individually.

VAT

You’re not entitled to reclaim from HMRC through the VAT system any of the VAT you’re charged on goods that you buy personally, regardless of what use you then put them to.

VAT on expenditure can only be reclaimed by VAT registered businesses, and only when they have been charged it by their suppliers and the purchase is to be used by them in making taxable supplies (which essentially means generating income which itself is subject to VAT).

Employment Taxes (Income Tax / National Insurance)

This is not my current area of knowledge, I’ve not been involved with employment taxes since 2014. So you may be better with an income tax forum! I’m aware of this one https://www.taxationweb.co.uk/forum/viewforum.php?f=9 and I’m sure there must be others!

But I know that employees are entitled to reclaim income tax relief in respect of some purchases they may make for use in their employment, provided that those costs are not reimbursed as expenses by their employer. This tax relief is what is covered by the form in your original post. It’s likely that any values you’re asked for on this form should be the VAT inclusive amounts, as that is the cost that you’ve incurred.

I’m sure you can’t reclaim the actual cost of a car in this way. In virtually all circumstances HMRC consider cars to have an element of, or potential for, private use – even when they’re owned by businesses. However, HMRC do allow tax relief on 45p per mile when an employee uses their own car for what HMRC regard as business use. There are some complex rules on what counts as business use, for example journeys from home to a normal workplace are excluded. If you’re not paid a mileage allowance by your employer (or are paid at a rate of less than 45p per mile), you are probably entitled to tax relief on the 45p per mile (or the difference between that and whatever your employer does pay).

[Trevor S]

Thanks. I think that a consultation with a VAT advisor is going to be the best option for you. I fully understand your reluctance to go into detail on a public forum, but it’s a bit like seeking a medical diagnosis without fully describing the symptoms! The missing information may well impact on the VAT position. It may mean that potential opportunities aren’t suggested and/or irrelevant ones are (which then only adds to the confusion). Hopefully in a private consultation you’ll feel more able to provide the information.

Do you already have an accountant – if so, they may already be aware of an advisor who has assisted other clients with land and property VAT issues. Professional bodies are the CIOT (Chartered Institute of Taxation) and the ATT (Association of Taxation Technicians). The CIOT’s CTA qualification is a higher level than the ATT, some CTAs will have taken the ATT first. There was once a separate body for indirect taxes such as VAT called the IIT (Institute of Indirect Taxation), however this merged with the CIOT some years ago. There are some big differences in principles between direct and indirect taxation, and at one stage they fell under different tax authorities – Inland Revenue and HM Customs and Excise. So an expert in one area may have a more limited understanding of the other. Over time, the CIOT/IIT merger may help to address this.

Bear in mind that there are also many highly experienced and knowledgeable advisors who do not hold a professional qualification. Ex-HMRC employees are likely to be in this position, as HMRC/HMCE run their own training and professional development programmes. Some who were employed in in-house advisory roles will be in a similar position. Potentially there are advantages of experience when dealing with specific very technical advisory issues which won’t necessarily have been covered in an exam. However, the lack of membership does mean that their work won’t be governed by the rules of a professional body.

[Trevor S]

All of HMRC’s guidance on the option to tax is in their Notice 742A here: https://www.gov.uk/guidance/opting-to-tax-land-and-buildings-notice-742a. I’ll refer to extracts below.

From your wording, it sounds like the seller has made either a Real Estate Election or a Global Option to Tax. Both are covered by section 14 and broadly have the effect of opting all or a large number of properties. It’s also possible that they may just routinely opt to tax all properties as they acquire them. All have conditions that need to be met. But on the basis that we have no reason to believe otherwise, I’ll assume that they do have a valid option to tax which covers the property in question

Buyers cannot just choose to “opt out” of a seller’s option to tax. However, there are specific circumstances detailed in section 3 of the notice where the seller’s option to tax either won’t apply or can be “disapplied” by the buyer, and the sale will be VAT exempt. Generally they’re dependent on the current or intended use of the land and/or the status of the buyer, and some require the buyer to certify eligibility. But it would be worth you looking through that section to see if any seem relevant to your circumstances.

Another consideration would be whether your purchase would be regarded as a Transfer of a Going Concern (TOGC). These are covered by a different Notice, 700/9: https://www.gov.uk/guidance/transfer-a-business-as-a-going-concern-and-vat-notice-7009, see section 6 of that notice onwards. Essentially this would most likely apply if:

• the seller was currently letting the land to a third party tenant; and
• you were buying the land with the ongoing lease to that third party and continued letting it to them; and
• you registered for VAT (if you are not already) and opted to tax the land so that supplies you made of it were subject to VAT.

If you meet the TOGC criteria, you would need to agree with the seller that it was a TOGC, and the sale would not be subject to VAT.

If neither of the above apply, what is your intended use for the land? Would it be worth you registering for VAT and (if relevant) maybe opting to tax any onward supplies (if you’re making any)? You would need to consider whether your customers could disapply your option to tax.

Hope this helps! Land and property generally (not just the option to tax) is a very complex area of VAT. So, particularly if it appears that the option to tax will still apply, you may well benefit from a consultation with a VAT advisor. They will then be in a position to offer advice with a more detailed understanding of your business and your intended use of the property.

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