Advice
Author
James Thomas is commercial manager at d&t, a team of award-winning chartered accountants and business advisers to more than 100 different franchise networks
team-dt.com
“It is surprising how many franchisors are unaware of this important section of the VAT legislation”
V
AT and tax can be complicated! As a franchise, knowing your numbers could really help your
business thrive. Therefore, working with the right accountancy experts can make a significant difference. One little-known area worth highlighting is the VAT private tuition exemption.
Did you know?
Franchisees and franchisors, just like any business turning over more than £85,000 per year, need to be registered for VAT and charge 20 per cent on sales of most goods and services. Those same VAT-registered businesses may reclaim any VAT they’ve paid on business-related goods or services. However, often for small tuition organisations, this doesn’t amount to a significant proportion of the VAT that is payable. There are only a few exceptions to the VAT rules, and here’s where it gets interesting: no VAT should be charged on goods or services that are exempt, zero-rated or outside the scope of the UK VAT system. One area where our experts at d&t work with around 1,000 franchise
clients in the UK is in relation to the VAT private tuition exemption. It is surprising how many franchisors are unaware of this important section of the VAT legislation. If you run a teaching franchise where the subject is ‘ordinarily taught in schools’ then this warrants further exploration, because if you are registered for VAT, it is possible you may not need to be, and this can be hugely advantageous.
Where expert advice will help To illustrate the savings that could
be made, consider that an ordinary VAT-registered business turning over £120,000 (gross) per year will need to pay HMRC £20,000 a year in VAT. They might reclaim £2,000 for business- related services, bringing their total VAT bill for the year to £18,000. On the other hand, a business that qualifies for the tuition exemption, and is also turning over £120,000 per year, will not need to register for VAT, saving them £18,000 every year. It should be noted that the above examples are based on someone who is registered for VAT under the standard scheme. There are some VAT schemes, such as the flat rate scheme, that could help reduce the VAT liabilities in some cases, but the
beauty of the exemption is that it could reduce it completely. However, VAT is a complex issue, and the exemption may only apply if certain conditions are met, or in particular circumstances. This is where advice from one of our experts at d&t comes into its own. d&t now acts for franchise networks teaching numerous subjects ordinarily taught in schools, including football, rugby, swimming, dance and drama. This saves many franchisees thousands of pounds every year. With one franchise network of around 200 franchisees, we have helped them save an average of £20,000 a year each through the tuition exemption.
A call away...
So, back to the question: are teaching franchises exempt from VAT? The answer is: it depends on multiple factors and individual circumstances. To help franchisees and franchisors find out if they could be eligible for the VAT private tuition exemption, we offer a free introductory call with one of our experienced advisers. Our goal is to help franchisees and franchisors grow their businesses with straight talking advice and by adding value, not numbers.
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