November 2013 academies and free schools - …

1 VAT f o racademiesand free schoolsNovember 2013auditors and advisorssayervincent1 Introduction2 Registering for VAT3S33b VAT refund scheme4 VAT recovery and refunds5 Particular activities6 Further informationAppendix Basics of VAT1 Introduction4 The S33b scheme 4 Charity reliefs 42 Registering for VAT5 Mandatory registration 5 Exemption from registration 5 Voluntary registration 6 Deregistration 6 VAT periods 6 Pre-registration VAT 6 VAT groups 73S33b VAT refund scheme8 Scope of the scheme 8 Transitional arrangements 8 Claims time limit 9 Claims procedure 9 Monthly VAT returns 94 VAT recovery and refunds10 Definitions 10 How purchases are used 10 VAT codes 12 Attributing and apportioning VAT 13 The business / non-business method 13 The Children s Society principle 14 The partial exemption method 15 Special methods 15De-minimis test 16 The annual adjustment 17 Provisional recovery rates 17 Annual de-minimis test 17 Capital goods scheme 18 Bad debts 18 Cash accounting scheme 195 Particular activities20 Admissions

2 To cultural events 20 Advertising 21 Breakfast and after school clubs 21 Building and construction services 22 Car parking facilities 23 VAT for academies and free schools2 Catering 24 Catering contractors 25 Consultancy services 26 Donated goods 26 Education 27 Energy saving materials 28 Export of goods 28 Fundraising events 29 Gas and electricity 29 Holiday clubs and activities 30 Letting land and buildings 30 Lotteries 32 Mentoring fees 32 Musical instruments 33 Option to tax 33 Printed matter 34 Pupil accommodation 34 school photographs 34 school proms 35 school trips 35 school uniforms 35 Sport and physical education 36 Sports facilities 37 Supplies of staff 38 Supplies to pupils 406 Further information42 HMRC guidance 42 Legislation 42 Sayer Vincent publications 42 Appendix Basics of VAT43 How VAT works 43 Meaning of output VAT and input VAT 43 Meaning of supply 43 Business and non-business 45 Exempt supplies 45 Taxable supplies 45 Standard-rated.

3 Reduced-rate and zero-rated supplies 46 Tax points 46 ContentsVAT for academies and free schools3 How VAT works for an academy or free schoolBusinessSupplyExemptTaxableZero-ra teReducedrateStandardrateNon-businessor outside the scope of VATNo VAT charged on supplyVAT charged on supplyAcademy orfree schoolas supplierReclaim VATincurred in theactivity unders33bAcademy cannotrecover VATincurred in makingthe supply unless deminimisVAT registered academy can recoverVAT incurred in making the academy cannot recoveror reclaim VAT incurred in making thesupplyAcademy orfree schoolas customerNo VAT should be charged by VAT to be reclaimed or recovered byacademyRecovery by academy depends on how supply used by academyIf used for non-business activityreclaim under s33b If used for taxable activity or de-minimis exempt activity andacademy VAT registered.

4 Recover in VAT returnOtherwise cannot recover orreclaimTypes of supplyVAT rules foracademies andfree schoolsVAT for academies and free schools4 This guide is a general introduction to VAT for academy and freeschools (collectively referred to as academies ). It covers VAT lawand practice as at September 2013 . This guide outlines thefollowing: The normal VAT rules that apply to any UK business. Forpeople new to VAT the Appendix: Basics of VATexplains howVAT operates. The section Registering for VATexplains VATregistration and the section VAT recovery and refundsexplainsthe rules for getting back the VAT incurred on purchases.

5 The s33b refund scheme this is a special VAT refund schemefor academy schools . The section s33b VAT refund schemeexplains the scheme and the section VAT recovery and refundsexplains how VAT is reclaimed under the scheme. The special VAT reliefs for charities these fit into two types: school as customer: a charity tells a supplier to change theirnormal VAT treatment to a more beneficial one. A schooldoes not have to be VAT registered to benefit from thesecharity reliefs. school as supplier: the VAT treatment of a supply whenmade by a charity is different from the normal key special VAT reliefs for schools are explained in thesection Particular for academies and free schools5 This section explains when you must register for VAT and whenyou can register for VAT voluntarily.

6 It also explains when youcan avoid having to register for VAT, when you can de-registervoluntarily and when you must de-register. Mandatory registrationYou must register for VAT if your turnover from taxable activitiesexceeds theVAT registration threshold. That is unless you meetone of the conditions for exemption from registration explainedbelow. The VAT registration threshold is increased annually inthe government s budget. The VAT registration threshold from 1 April 2013 is 79, must register for VAT if either:1At the end of any calendar month, the value of taxable suppliesin the last 12 calendar months has exceeded the VATregistration threshold.

7 You must notify HMRC within 30 days of the end of the monthand will be registered from the first day of the second example if you exceed the VAT registration threshold on 31 August, you will be VAT registered from 1 any time, there are reasonable grounds for believing thatthe value of taxable supplies in the next 30 days alone willexceed the VAT registration threshold. You must notify HMRC within 30 days of becoming aware thatthe threshold will be exceeded. The registration is effectivefrom the date you became aware.

8 For example, if you sign acontract on 21 August to make a taxable supply of 100,000 on10 September, you will be VAT registered from 21 August. You register by completing form VAT 1 or online. Once you areregistered you must provide your customers with proper VATinvoices and complete regular VAT returns. From 1 April 2012 allVAT returns have to be completed online and VAT paymentsmade electronically unless you belong to a very small group ofexceptions. Exemption from registrationYou can be exempted from mandatory registration in scenario 1,above if you can demonstrate, to HMRC s satisfaction, that your2 Registering for VATVAT for academies and free schools6level of taxable supplies will drop below the VAT de-registrationthreshold in the next 12 months.

9 The VAT de-registrationthreshold is normally 2,000 less than the VAT registrationthreshold and is, from 1 April 2013 , 77, may also permit a business to be exempted fromregistration if it makes or will make mainly zero-rated supplies,so that it would normally recover VAT from HMRC rather thanpay it. Voluntary registrationA business can register for VAT voluntarily as long as it makes orwill make some taxable supplies. It may have to provide evidenceof an intention to make taxable must de-register for VAT if you cease making all taxablesupplies.

10 You can de-register for VAT if you can satisfy HMRC that yourtaxable turnover will drop below the de-registration threshold inthe next 12 months. HMRC will also permit a business to beexempted from registration on the grounds of making mainlyzero-rated supplies even after it has been VAT registered. VAT periodsQuarterly returnsVAT returns are normally submitted period of four quarters ending (normally) on 31 March, 30 April or 31 May is referred to as the VAT year. Monthly returnsYou can request monthly VAT returns.