Finance
other elements are merely ancillary to the hire. Or are they integral to the hire and a ‘means of better enjoying’ the hire? If so the hire will still be exempt from VAT. Despite the ordinary exemption for
the hire of rooms and halls, you may see some commercial organisations charging VAT. Any entity is able to ‘opt to tax’, and, in doing so, the supplier is obliged to charge VAT (subject to certain avoidance tests), which means its supplies become taxable. An academy, however, rarely needs to opt to tax as its predominantly non-business use of the asset would usually allow for a very high recovery position.
Taxable supply Although in practice there will be hires that HMRC accept are exempt from VAT where, as they see it, the hirer is merely provided with a ‘key to the door’, there are exceptions irrespective of an option to tax. There could be elements supplied that may not be inextricably linked with the hire, but are optional extras. It may be appropriate to add VAT just to these extras. If there are any additional services or things that enhance the hire, or that represent the customer’s main reason for the hire – such as the use of specialist IT or laboratory facilities – this may turn the hire into a taxable service. Hires should be carefully reviewed.
In recent years, HMRC seems to be looking intently for the additional ‘thing’ that makes a hire a taxable service. For example, HMRC’s policy on exhibition stand hires changed so
54 SPRING 2018 FundEd
‘The letting of sporting
facilities is an exception to the usual exemptions for letting
of space... organisations with charitable status may have a wider exemption’
that even power supplied to a stand make a hire taxable. There have also been cases concerning hires at fairs and events, where it has been decided that a person hiring space of land, making the supply one of taxable services. For an academy, an example of where the boundary could be crossed is the hire of a hall with a technician to assist with sound and lighting equipment. Seek specialist advice if you feel that what is supplied incorporates a number of elements, and if it potentially results in the VAT registration threshold being exceeded.
Sports lettings The hire of facilities necessary for playing sport or undertaking physical education is another area of confusion. Prior to conversion to academy status, the rules for Local Authorities may have only allowed exemption for a series of ten or more lets, or if the hire is for a period of more than 24 hours. The letting of sporting facilities is an exception to the usual exemptions for letting of space, which is why most entities have to charge VAT unless they meet either of these two tests. However,
organisations recognised as having charitable status – academies included – may well have a wider exemption where they meet the sporting ‘eligible body’ tests. To be eligible, the academy must have charitable status; be precluded from use any surplus for the facilities or wider charity; and not be subject A European Court decision
involving Canterbury Hockey Club has since allowed supplies to clubs and associations to be looked to be the individuals that are part of the club. Supplies for corporate purposes such as a business by allowing it to entertain its customers or staff, for example, would ordinarily be taxable. For more information on VAT
regulations, contact HMRC via
gov.uk/VAT. It is recommended circumstances with a VAT specialist.
Rupert Moyle leads the VAT and Duty team at Kreston Reeves, a group of chartered accountants and financial advisers. Rupert has specialised in VAT for over 25 years and has experience across a variety of sectors including education. He advises on issues such as property transactions, partial recovery methods and reliefs from VAT. He is also experienced in handling negotiations with HMRC and appeals. For more information, go to
krestonreeves.com.
Coming up next issue… VAT on fundraised income – part 2: donations. Defining what is a donation and what is ‘supply’.
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