A VAT Guide for English Rugby Clubs

Transcription

1 A VAT Guide fr English Rugby Clubs This guide has been prepared by The Rugby Ftball Unin. Sectins 2 t 6, 9, the last tw paragraphs f sectin 1 and the appendices make extensive use f the VAT and Ftball dcument (which was prepared jintly by The Ftball Assciatin and Delitte & Tuche LLP). Any use made here is dne s with their generus permissin. Any direct reprductin f that dcument is clearly attributed in the relevant sectin. Thanks are als due t Hays Macintyre and Richard Baldwin fr updating the dcument t reflect changes in the law This dcument is fr guidance nly and sme f the cmments may nt be applicable in certain situatins. It shuld nt be regarded as a substitute fr btaining prfessinal advice frm either a chartered accuntant r a VAT specialist and the Rugby Ftball Unin cannt accept any liability where clubs r individuals have made decisins based n this guidance. Versin 4 April 2013

2 Cntents 1 Intrductin 3 2 Glssary 4 3 VAT Registratin 5 4 VAT n Incme 7 5 Recvery f VAT n Expenditure 9 Page 6 Recrds and Accunts 11 7 Minimising VAT Csts 19 8 Vat and club charities 19 9 Cmmn Issues Affecting Rugby Clubs Planning Pints t Minimise Restrictins n the Recvery f 24 Input Tax 11 Cnclusin 26 Appendices 27 2

3 1 Intrductin Whether large r small, prfessinal r amateur, incrprated r unincrprated, rugby clubs will encunter Value Added Tax (VAT) in their everyday dealings. As such, it is vitally imprtant that all clubs are nt nly aware f the ptential liabilities that can arise frm VAT, but als that they have sme idea f hw t arrange their affairs s that they can be as VAT efficient as pssible. With limited budgets and tight cash flws, the last thing that a club wants t d is t be paying ut tax (r fines) needlessly. With a varying level f VAT expertise between ur clubs, sme will be better equipped t deal with VAT than thers. Hwever, this dcument is intended t prvide all clubs, including thse with little r n current knwledge f the area, with sufficient infrmatin t functin efficiently and in line with current regulatins. Remember, if yu get yur VAT management wrng yu may be liable t pay taxes that yu were nt expecting, nt t mentin the penalties that can arise theren. Additinally, there may be sme events that affect yur VAT status and yu need t be aware f this in rder t plan prperly (e.g. capital expenditure can be affected by partial exemptin and thus yur ability t recver VAT see sectin 5). Unfrtunately, VAT mishaps can even happen t very small clubs and the fact that yu are amateur and functining with vlunteers nly will nt be seen as a valid excuse! In the United Kingdm, the VAT system is administered by HM Revenue and Custms (HMRC). VAT is an indirect tax and is levied n the taxable supply f gds r services made in the UK by a taxable persn in the curse r furtherance f his business. Fr this purpse the UK effectively includes the Isle f Man. VAT is als chargeable n the imprtatin and acquisitin f gds int the UK and n receipt f certain services frm verseas. Rugby clubs whether perating thugh a cmpany r unincrprated assciatin may find themselves liable t VAT. Its impact will be particularly felt by the larger clubs with increasing levels f cmmercial incme but even the smaller clubs will have t cntend with it if their turnver exceeds the VAT registratin limit r if they register vluntarily (discussed later). The main sectins f this dcument give guidance n the basic principles f VAT as they affect rugby clubs. The appendices cntain mre detailed infrmatin including the VAT treatment f varius types f incme. 3

4 2 Glssary Outputs Incme received fr gds and services supplied by the rugby club. Output tax VAT n utputs taxable at the standard r reduced rate. Inputs Expenditure incurred n taxable gds and services ging int the business including purchases fr use in the business and fr resale, and general verheads. Input tax VAT n inputs taxable at the standard r reduced rate. Zer rate supplies Where VAT is chargeable at 0% (full recvery available fr VAT n cnnected expenditure). Examples are included in Appendix 1. Standard rate supplies Where VAT is chargeable at 20.0% (full recvery available fr VAT n cnnected expenditure). Examples are included in Appendix 1. Exempt supplies N VAT is chargeable n the supply (VAT n directly related csts cannt be recvered) (See VAT n Incme, Sectin 4.2 and Recvery f VAT n expenditure, Sectin 5 ). Exempt input tax VAT n expenditure related t generating VAT exempt incme. Partly exempt entity An entity having bth taxable and exempt incme which therefre may nt be able t recver its input tax in full. This situatin is knwn as partial exemptin. Taxable turnver Standard, reduced and zer-rated utputs. Reverse charge The prcedure whereby the custmer, and nt the supplier, accunts fr utput tax at the rate applicable in the cuntry f the custmer. The utput tax paid is recverable by the custmer as input tax subject t the nrmal rules gverning recverability. 4

5 3 VAT Registratin When the taxable (standard, reduced and zer-rated) turnver f a rugby club exceeds certain limits, it must apply fr VAT registratin. This prcedure is quite separate frm any ntificatin required fr PAYE r crpratin tax purpses. The terms standard rate reduced rate and zer rate and the liability f incme t VAT are utlined in Sectin 4 and cvered in mre detail in Appendix 1. It must be appreciated that fr VAT purpses a rugby club is a business even if it des nt set ut t make a prfit in the cmmercial sense and is nt rganised as a cmpany as many businesses are. Hwever, certain incme is exempt which may mean that clubs are nt required t be registered. (Sectin 4 gives mre detail n what incme is exempt). Cmpulsry VAT registratin VAT registratin is cmpulsry when taxable turnver in the preceding twelve mnths (r expected turnver in the next thirty days) exceeds the VAT registratin threshld. The threshld is revised annually and is currently 79,000 per annum with effect frm 1 st April Please nte that this limit is usually updated n the 1 st f April each year. As stated n the HMRC website, if the value f yur taxable supplies is ver a specific limit, yu need t register fr VAT, unless yur supplies are whlly r mainly zer rated in which case yu may apply fr exemptin frm registratin. Yu may be charged a penalty if yu register late. The easiest way t register fr VAT is by using HMRC s VAT Online Registratin Service. Ntice 700/1 n the HMRC website explains hw t apply fr: registratin if the value f yur taxable supplies is abve the limit exemptin frm registratin if yur taxable supplies are whlly r mainly zer-rated exemptin frm registratin if yu can shw yur future turnver will be belw the deregistratin limit vluntary registratin if the value f yur taxable supplies is belw the limit fr cmpulsry registratin vluntary registratin when yu make supplies utside the UK that wuld be taxable if made in the UK Please nte that yu d nt include exempt r utside the scpe incme when determining whether yu exceed the VAT registratin threshld. Once yu are liable t register yu shuld ntify HMRC immediately in writing r nline as there are penalties fr late registratin. Vluntary VAT registratin Yu may vluntarily register fr VAT even if yur taxable incme des nt exceed the cmpulsry registratin threshld. This may be favurable if the VAT yu are charged n yur expenditure is significant and yu are able t reclaim that VAT (but see partial exemptin, Sectin 5.1). The disadvantage f applying fr vluntary registratin is that yu will then have t charge VAT n all standard and reduced rate supplies made and file VAT returns. Once registered fr VAT yur pricing plicies may well need t alter t enable yu t charge VAT where necessary t avid being ut f pcket. Yu may als find that yur cashflw is affected. 5

6 What being registered means fr yur club Registered rugby clubs charge VAT n their standard rated supplies (see Sectin 4) and are entitled t recvery f VAT charged n supplies t them (see Sectin 5) resulting in net payments t, r repayments frm HMRC. As nted n the HMRC website, after yu have registered yu need t charge VAT n all yur taxable supplies frm yur date f registratin and keep: a recrd f all standard-rated gds and services yu supply r receive as part f yur business a separate recrd f any exempt supplies yu make a VAT accunt At preset intervals (see Sectin 6) yu need t fill in a VAT return with details f yur sales and purchases. All VAT returns must be submitted nline and payment must als be made electrnically. Sme rugby clubs may have an annual turnver belw the VAT registratin threshld and may therefre nt wish t register. Prvided they remain belw the threshld, clubs which are nt registered r liable t be registered can ignre VAT. In such cases VAT charged n any expenditure will nt be recverable and will thus add t perating csts. Applicatin fr VAT registratin Mst Vat registratins can be dne nline but paper registratin frms are available. HMRC aim t reply t applicatins within fur weeks f the applicatin being received and recmmend that businesses cntact them if HMRC d nt reply within that perid. Once the applicatin is apprved, a Certificate f Registratin is issued shwing the VAT registratin number and the VAT return perids allcated t that business. If yu want return perids t end n a particular quarter, fr example t tie in with yur year end, yu shuld request this at the time yu apply fr registratin by sending in a cvering letter with yur applicatin, thugh if yu d nt d this yu can request a change f return stagger at a later date. Deregistratin If the annual taxable incme generated by a rugby club that is currently registered fr VAT drps belw a certain limit ( 79,000 with effect frm 1 April 2013) it is pssible t deregister fr VAT. Hwever, in sme cases a cst may arise n deregistratin as the rugby club may have t accunt fr VAT t HMRC n certain business assets held at the time f deregistratin. If the value f the gds, n which VAT is due n deregistratin, is such that the VAT charge wuld nt exceed 1,000 (i.e. the net value f the gds des nt exceed 5,000) there is n requirement t accunt fr the VAT. 6

7 4 VAT n Incme VAT is a charge n business transactins (called supplies) invlving gds and services. It is als charged n the imprt f gds and n certain services received frm verseas. Each transactin entered int by a rugby club needs t be examined and its crrect VAT treatment identified. Fr this purpse all types f incme and activity can be categrised as set ut belw. Taxable Incme Taxable incme cnsists f the fllwing: Standard rate These are supplies made by yu (utputs) which are taxable and n which yu charge VAT at the standard rate currently 20.0%. The VAT n yur utputs is called utput tax. Zer rate These are supplies which are als taxable and liable t VAT but at 0%. This means that althugh this incme is cnsidered t be taxable, yu d nt actually have t accunt fr any VAT n it. Receipt f zer-rate incme des nt affect yur ability t reclaim VAT incurred n expenditure. Exempt Incme Certain types f incme are specifically exempted frm VAT and therefre yu d nt charge VAT. Exempt incme is nt taxable s yu d nt need t take it int accunt when yu are deciding whether yu need t be registered fr VAT. If yu are registered and in receipt f exempt incme, it is likely t affect yur ability t reclaim all VAT incurred n expenditure. This is dealt with in mre detail in Sectin 5. Incme which is utside the scpe f UK VAT Certain frms f incme are entirely utside the scpe f VAT, s n VAT is chargeable. Yu d nt take incme that is utside the scpe int accunt when yu are cnsidering whether yu need t be registered fr VAT. VAT liability f incme Belw is a table f the VAT liabilities f the main surces f incme a rugby club is likely t receive. There are specific rules and exceptins applied t each item and yu must lk at the mre detailed ntes in Appendix 1 fr further clarificatin. The fllwing list is fr quick reference guidance nly. 7

8 Standard rated Seasn ticket incme Gate receipts Spnsrship Advertising Ryalties Merchandising Hire f equipment Crprate events Catering Sales f gds (but see under zer-rated belw and cnsider reduced rate supplies) Vending machine incme Gaming machine incme (see belw fr exemptin fr machines with cash prizes) Bar sales (including pre-paid bar cards) Telephne incme (i.e. payphnes) Sales f assets/equipment Fees fr rugby summer schl Memrabilia sales Stadium tur incme Nn-playing scial/fan club membership Scial and fund raising events ( unless exemptin fr charity events applies- see Sectin 8) Zer rated Bks, magazines and handbks Prgrammes and fixture cards (prvided n mre than 25% f the ttal area is t be cmpleted by the recipient) Overseas turs (althugh these may crystallise VAT issues in the cuntries where the turs take place) In sme circumstances cld take-away fd (nt including sft drinks, ices etc) Exprts Children s clthing (i.e. children s team kits) Exempt Playing members subscriptins and fees Perimeter advertising (unless taxatin ptin taken up, see Appendix 1) Hire f facilities (unless taxatin ptin taken up, see Appendix 1) Ltteries and raffles (including takings frm electrnic lttery and bing machines) Other lettings (unless taxatin ptin taken up, see paragraph 19, Appendix 1 r the club prvides catering as well as the use f premises, e.g. fr a wedding receptin) Cmpetitin fees (where all returned as prizes r when prvided by nnprfit distributing bdies) Interest and insurance cmmissin Shares and Debentures Betting Outside the scpe Dnatins Gift aided dnatins t a CASC r charity Grants Insurance settlements Cmpensatin payments 8

9 5 Recvery f VAT n Expenditure (Input Tax) When a rugby club is VAT registered and receives nly taxable incme (explained in Sectin 4), it can reclaim the VAT it is charged n its expenditure subject t certain rules. VAT n expenditure is called input tax. The recvery f input tax n the purchase f sme gds and services is specifically blcked, whatever yur business. Examples f these are: Purchase f a mtr car (unless used whlly fr business purpses); Business entertainment where n nward charge is made (this excludes the htel expenses and pst match refreshments f a visiting team which are met by the rugby club under a reciprcal arrangement); Business gifts csting mre than 50 (see Sectin 8.2). Partial Exemptin THIS IS A VERY IMPORTANT AREA FOR RUGBY CLUBS PARTICULARLY WHEN VAT HAS BEEN OR IS ABOUT TO BE INCURRED ON SUBSTANTIAL CAPITAL EXPENDITURE. It is a cmmn miscnceptin that nce a rugby club has been registered fr VAT, 100% f VAT n its purchases can be recvered. This is rarely the case. Where a rugby club which is registered fr VAT receives exempt incme (fr example, players subscriptins r rent frm premises which have nt had the taxatin ptin taken up) as well as taxable incme, it is said t be partly exempt. This means it will nt be allwed t recver all the VAT it incurs n expenditure. VAT n csts incurred directly in cnnectin with an activity that generates taxable incme can be reclaimed but yu cannt reclaim the VAT n any csts which are incurred directly and whlly in cnnectin with an activity which will generate VAT exempt incme if thse csts exceed certain de minimis limits. Fr example, as incme frm ltteries is exempt, ptentially yu cannt recver the VAT n gds purchased as prizes r n printing the lttery ticket. The VAT n csts cnnected with exempt incme is called exempt input tax. Sme exempt input tax will be clearly identifiable. Frequently, hwever, input tax incurred n expenses will relate bth t exempt and t taxable incme (e.g. telephne bills, club verheads). The VAT n these expenses may need t be apprtined and treated partly as exempt input tax and partly as recverable input tax subject again t the de minimis limits. The standard methd f apprtining this mixed use input tax is t reclaim a percentage f it, calculated by taking taxable incme as a prprtin f taxable and exempt incme. Althugh interest incme is exempt, it can usually be excluded frm this calculatin as incidental. If this methd des nt give a fair and reasnable result, it is pssible t apply t use anther methd t establish the recverable element f mixed use input tax. Fr example: values f taxable and exempt inputs (purchases); staff time spent n taxable and exempt activities; r flr space f areas used fr taxable and exempt activities. Yu must get HMRC s apprval prir t using any methd which is nt based n the values f incme. It is always sensible t seek prfessinal advice when determining an alternative methd particularly where substantial VAT csts will arise n imprved r new buildings and facilities (see planning pints in sectin 9). 9

10 Under the de minimis rules, if exempt input tax (including the VAT n the relevant prprtin f verheads) is less than 625 per mnth n average and nt mre than 50% f all input tax fr the perid, yu can reclaim yur VAT in full. With effect frm 1 April 2010 tw simplified de minimis tests can be applied. Test 1 Prvided yur ttal input tax incurred is nt mre than 625 per mnth n average and the value f yur exempt turnver is nt mre than 50% f all f yur turnver yu can be regarded as de minimis. Test 2 If yur ttal input tax relating t exempt supplies and mixed use supplies (i.e. excluding input tax relating nly t taxable supplies) is n mre than 625 per mnth n average and the value f yur exempt turnver is nt mre than 50% f all f yur turnver, yu are als de minimis. If yu are nt de minimis under these simplified tests a partial exemptin calculatin shuld be carried ut t see whether yu are de minimis. The standard partial exemptin calculatin wuld nrmally be carried ut fr each mnthly r quarterly return perid, but the VAT return figures are prvisinal and at the end f the VAT year (usually March, April r May) the figures must be recalculated fr the whle year. This will shw whether nr nt the exempt input tax incurred falls belw the de minimis limits n average. Any difference between the annual calculatin and the amunts previusly claimed shuld be declared n the next VAT return (whether an amunt is due t r frm HMRC). But, fr VAT years cmmencing n r after 1 April 2009 yu can simply apply the recvery rate frm yur previus year s annual recalculatin t the mixed use input tax in the fllwing year s VAT returns and then nly carry ut a partial exemptin calculatin at the year end. This reduces the number f calculatins frm 5 (assuming fur quarterly returns and the annual recalculatin) t 1. But y u still need t categrise the input tax in each quarter as relating t taxable, exempt, r mixed use. Partial Exemptin Standard Methd Override Althugh every business is entitled t use the standard methd, HMRC has intrduced an additinal adjustment t deal with circumstances where the standard methd des nt in their view prduce a fair and reasnable deductin f input tax. The verride requires businesses t make an adjustment when the input tax deducted during the year using the standard methd differs substantially frm a deductin based n the use r intended use f the gds and services received by the business in making its taxable supplies. A difference is substantial if it exceeds: 50,000; r 50 per cent f the mixed use input tax incurred but nt less than 25,000. Any calculatin t establish the use r intended use f the input tax will be acceptable t HMRC prvided it prduces a fair and reasnable attributin. This rule applies t input tax incurred n r after 18 April Hwever, the rules d nt affect businesses perating an apprved r directed partial exemptin special methd. 10

11 Nn-Business In the event that a rugby club incurs expenditure related t a nn-business activity there is n entitlement t recver the VAT n the csts. Unlike the partial exemptin calculatins described abve, there is n threshld befre the nn-business restrictin applies. Capital Gds Scheme Clubs planning majr capital expenditure need t be aware f the Capital Gds Scheme. This is an extensin f partial exemptin and applies t thse that make bth exempt and taxable supplies i.e. mst rugby clubs which acquire cmputer systems in excess f 50,000 value r spend 250,000 r mre n cnstructin csts. Even where clubs have been within the de minimis limits previusly, expenditure f this nature is likely t put them ver the limits. With the Capital Gds Scheme VAT recvered n the item under their partial exemptin methd in year ne is adjusted ver a 5-year perid in the case f cmputers r 10 years in respect f buildings. T give an example, if a club cnstructed a new clubhuse at a cst f 1 millin and had an 80% VAT recvery rate in year 1 it wuld recver VAT f 200,000 x 80% = 160,000 If in subsequent years the VAT recvery rate decreased it wuld have t repay additinal VAT. If n the ther hand the VAT recvery rate increased there wuld be further VAT t reclaim. If the item subject t the Capital Gds Scheme is sld within the adjustment perid, there are special rules and the extent f pssible adverse effects shuld be calculated with specialist advice if necessary. It can be seen that by keeping taxable incme relatively high, imprved VAT recvery can be achieved, even thugh mre utput VAT wuld be due. Special attentin shuld be given t the partial exemptin methd emplyed. It may be pssible t agree a special methd with HMRC. This is a cmplicated area and any club cntemplating capital expenditure f this nature shuld cnsider taking apprpriate VAT advice in advance. Gds Supplied frm anther EU Cuntry If gds are brught int the UK frm anther EU cuntry, VAT has t be calculated and accunted fr as utput tax t HMRC n the VAT return. This VAT can be reclaimed n the same VAT return as input tax subject t any restrictin referred t abve, e.g. partial exemptin r use f the gds fr business entertainment. Services Supplied frm utside the UK Similarly, mst services received by a rugby club frm utside the UK mean the rugby club self accunts fr VAT using the reverse charge. See Appendix 3 fr a list f the exceptins. 11

12 6 Recrds and Accunts HMRC require that yur recrds are maintained in sufficient detail t enable their visiting VAT fficers t check the make-up f the figures n yur VAT returns. It is very imprtant that yu keep all invices received and issued as evidence in supprt f yur claims fr input tax and declaratin f utput tax. Unless therwise agreed with HMRC the recrds shuld be retained fr six years and in their riginal frm. Fr smaller clubs an analysed cash bk system (with VAT clumns) may be a sufficient recrding system fr VAT purpses. Yu may wish t separate yur receipts int categries (e.g. gate receipts, bar takings, gaming machine receipts and sundry sales) and t analyse yur purchases in detail. Yu shuld ensure that VAT is separately identified in the clubs accunting recrds d nt enter the grss figures nly. Yu must nt merely recrd the prfit element f an event (e.g. catering receipts less cst f fd) as yu will be understating the VAT due. Yu shuld als ensure that any cash payments made frm the till are included in the till ttal takings figure which yu recrd after cashing up. Using the current standard VAT rate f 20.0%, t calculate the VAT due frm yur bar takings, yu shuld multiply the takings by 1/6. When VAT is due Output tax nrmally has t be recrded n the VAT return either in the perid when yu issue an invice r when yu receive a payment, whichever happens first. Depsits r installments are generally treated as advance payments and VAT must be accunted fr n receipt. Where a custmer pays by credit card many clubs will accunt fr VAT in the perid in which the payment by the custmer is accepted (i.e. the date the card is swiped). Strictly speaking payment is nt made until the perid in which the sum invlved is paid t the rugby club by the credit card cmpany, which culd be in a later perid than when the card is swiped. Simplified Accunting Schemes There are a number f schemes available t small business in rder t simplify their accunting requirements. Annual Accunting The nrmal basis fr submitting VAT returns is every ne r three mnths. Hwever, there are circumstances in which a business can simplify its VAT accunting and nly submit ne VAT return per year. Fr details see Sectin 6.5 Submissin f Returns. Cash Accunting A special cash accunting scheme is available t rugby clubs with a taxable turnver up t 1,350,000 per year. This effectively means that VAT has t be shwn n the return nly when payment is received frm a custmer r made t a supplier. The main advantages f the scheme are that the rugby club des nt need t cnsider bad debt relief adjustments r the deferral f the time fr payment f VAT where extended credit is given. Output tax is accunted fr in the return nly fr the VAT perid in which payment is received. Input tax is reclaimed in the return fr the VAT perid in which payment is made r ther cnsideratin t the supplier is given r in a later perid as may be agreed with HMRC. This cntrasts with the accruals basis f VAT accunting which mst businesses perate which uses invice dates fr purchases and sales, tgether with bad debt relief adjustments. Further detail can be fund n the HMRC website. Flat Rate Scheme fr Small Business The flat rate scheme allws businesses t calculate their VAT payment as a percentage f the VAT inclusive turnver. Therefre, businesses d nt need t identify VAT n each sale r purchase t calculate the VAT due t HMRC in each 12

13 VAT return perid. The aim is that businesses will spend less time and mney maintaining VAT recrds and calculating the VAT payable t HMRC. The scheme is pen t businesses whse annual taxable turnver des nt exceed 150,000 Hwever the scheme cannt be used in cnjunctin with the cash accunting scheme r in certain ther specific circumstances. Use f the scheme nly affects the way in which the VAT due t HMRC is calculated. Therefre, VAT shuld cntinue t be charged t custmers in the nrmal way and VAT invices issued t business custmers. In rder t calculate the VAT due t HMRC, the business shuld take the VAT inclusive turnver and multiply this by the flat rate percentage fr the business s particular trade sectr. If a business uses the scheme it is nt, in general, able t recver VAT n its purchases as the flat rate percentage includes an allwance fr these items. Hwever, a business is entitled t claim VAT in the nrmal way where it purchases a single capital asset with an invice value (including VAT) f 2,000 r mre. Yu cannt cntinue using the scheme where the ttal VAT inclusive turnver fr the previus year (the 12-mnth anniversary f jining the scheme) exceeds 230,000 r there are grunds fr believing it will exceed 230,000 in the fllwing 30 days alne. The flat rate percentages t be applied are set by HMRC and may be amended frm time t time. HMRC allcate the percentages acrss trade sectrs. We wuld recmmend prfessinal advice is sught t clarify the psitin if yu are cnsidering applying the flat rate scheme. Further detail can be fund n the HMRC website. Invices Generally, invices nly need t be issued by rugby clubs t its VAT registered custmers. With effect frm 1 January 2004, the infrmatin t be cntained with a VAT invice has been, in the main, standardised thrughut the EU. Fr UK businesses the fllwing infrmatin must be included n all invices: supplier s name (i.e. the rugby club s), address and VAT registratin number; custmers name and address (and VAT registratin number when in anther EU cuntry); quantity and descriptin f the gds r services; unit price; the date f supply; the net value fr each descriptin and rate f VAT, expressed in any currency; rate f discunt; the net value f supply, expressed in any currency; 13

14 ttal VAT payable in sterling; date f issue; and a sequential identifying number based n ne r mre series which uniquely identifies the dcument. Where purchase invices are received in a language ther that English, HMRC may request an English translatin. Ntice f the request will be prvided in writing and the translatin must be prvided within 30 days f the date f the ntice. Fr credit ntes r amended invices, which are issued t custmers in ther EU cuntries, full details f the riginal invice must be cntained in the credit nte r amended invice. Hwever, the fllwing infrmatin may be mitted: the net value fr each descriptin and rate f VAT, expressed in any currency; the net value f supply, expressed in any currency; and ttal VAT payable in sterling. Summary invices may be issued fr supplies under 250 and nt t a custmer in anther EU cuntry. The summary invices must include the fllwing: the name, address and registratin number f the seller; the time f supply; a descriptin sufficient t identify the gds r services supplied; the ttal amunt payable including VAT; and fr each rate f VAT chargeable, the grss amunt payable including VAT, and the VAT rate applicable. Bad Debt Relief A rugby club is entitled t a refund f VAT relating t bad debts when the fllwing criteria have been met: utput tax has been accunted fr n the supply f gds r services; the bad debt has been written ff in the accunts; and six mnths have elapsed frm the later f the date f the riginal supply and the date when payment was due. If all the abve cnditins are met yur rugby club can recver the VAT by entering the amunt n bx 4 f the VAT return. Please nte that if a custmer subsequently makes a part payment against varius debts the payment must be allcated t the earliest relevant transactins first. Any bad debt relief previusly claimed will need t be repaid t HMRC in these circumstances. A rugby club must als repay VAT previusly claimed n its purchases if the debt remains unpaid fr at least six mnths frm the later f the date f the invice r the date the invice becme due fr payment. 14

15 SUBMISSION OF RETURNS VAT Returns Once registered, businesses have t submit VAT returns and payments t HMRC electrnically. This will nrmally be quarterly althugh there are exceptins such as annual accunting (see belw) and mnthly returns (which wuld be f benefit t thse clubs that receive regular repayments f VAT. Certain large payers f VAT are required t make payments n accunt (see belw). Virtually all VAT returns are made nline. HMRC will send reminders when returns are due. The VAT return and any payment shuld be received by HMRC within ne calendar mnth and seven days fllwing the end f the return perid. Fr example, a VAT return frm fr the quarter ended 30 June must be received with payment by HMRC by 7 August. Special rules apply where VAT returns d nt cver standard mnthly r quarterly perids. Clubs must be registered with the Gvernment Gateway (the centralised registratin service fr e- Gvernment). Details f hw t register can be fund n HMRC's website. A pr frma VAT return (Frm VAT 100) is attached at Appendix 2. The return frm sets ut: Bx 1 the VAT due in the perid n sales and ther utputs; Bx 2 the VAT due n acquisitins frm EU cuntries; Bx 3 ttal VAT due; Bx 4 the VAT reclaimed in the perid n purchases and ther inputs including acquisitins; Bx 5 the net tax due t r frm HMRC; Bxes 6 and 7 statistical infrmatin f the value f utputs and inputs fr the perid (exclusive f VAT); Bxes 8 and 9 statistical infrmatin f the value f supplies f gds t and acquisitins frm ther EU cuntries; and a declaratin t be signed by and n behalf f the registered persn t the effect that the infrmatin given in the return is true and cmplete. Bx 6 shuld include any zer-rated and exempt supplies and any reverse charge transactins. Bxes 6 and 7 shuld exclude VAT, wages/salaries/paye/nic, lans, dividends r gifts f mney, and insurance claims. Annual Accunting After 1 April 2006 it became pssible t apply t HMRC t submit ne annual VAT return instead f fur quarterly returns prvided that yu expect t have taxable supplies n greater than 1,350,000 in the cming year. In thse cases where HMRC allw annual accunting they require mnthly direct debit payments based n their estimate f yur VAT liability. This is then adjusted with a balancing payment with yur annual return. Further detail can be fund n the HMRC Website. 15

16 Payments n Accunt If a VAT registered rugby club has an annual VAT liability f mre than 2 millin it is required t make mnthly payments n accunt. This means making an interim VAT payment in the secnd and third mnth f the VAT quarter with a balancing payment submitted with the VAT return. HMRC will prvide an estimate f the VAT interim payments t be made. Alternatively, businesses can pt t make payments based n actual liabilities r by submitting mnthly returns. All payments n accunt have t be made by electrnic transfer and there is n seven day extensin under the credit transfer scheme. Further detail can be fund n the HMRC website. PENALTIES Late registratin There is a penalty fr failing t register fr VAT n time. This penalty is calculated as a percentage f the VAT due t HMRC, frm the date when registratin shuld have taken place t when HMRC where actually ntified. The amunt f the penalty depends n whether any disclsure f the failure is prmpted r unprmpted, and the reasn why yu failed t ntify HMRC. This is summarised in the table belw: Why yu failed t Disclsure Minimum penalty Maximum penalty ntify HMRC Reasnable excuse N penalty N penalty Nt deliberate Unprmpted 0% within 12 30% mnths f tax being Prmpted 10% within due 12 30%, mnths f tax being therwise due, therwise 10% 20% Deliberate Unprmpted 20% 70% Prmpted 35% 70% Deliberate and cncealed Unprmpted 30% 100% Prmpted 50% 100% Essentially a disclsure is unprmpted if it is made at such a time that a taxpayer has n reasn t believe that HMRC might be enquiring int his affairs. As the late registratin penalty is based n the VAT due t HMRC it is imprtant t ensure as much credit as pssible is claimed fr input tax recverable as this will reduce the amunt f any ptential penalty. Default surcharge When a VAT return and/r payment is received late by HMRC a default ccurs. After the first default, HMRC will issue a Surcharge Liability Ntice and if further defaults ccur a penalty is impsed. The secnd late return will attract a penalty f 2% and this rises t 5%, 10% and a maximum f 15% fr subsequent late VAT returns. The penalty is calculated n the net tax due n the late VAT return. Returns have t be submitted n time fr a twelve mnth perid t cancel the default surcharge regime. HMRC have intrduced a special arrangement fr small businesses whereby the first time such a business defaults it will be sent a letter ffering help and supprt rather than a Surcharge Liability Ntice. HMRC define a small business as ne with a turnver f less than 150,000 (with effect frm 1 January 2003). 16

17 If a club has a time t pay agreement in place with HMRC then the failure t make the apprpriate payment n time will nt cunt as a default fr these purpses, but any subsequent breach f the agreement can result in a surcharge being reinstated. Penalty fr errrs in a return A is triggered when a VAT return has under declared the VAT due r verstated the amunt f VAT recverable. A penalty is als triggered if HMRC issue an assessment because a VAT return has nt been rendered, the assessment is less than the amunt due and HMRC are nt ntified within thirty days f the assessment f the true amunt f tax due. As with the failure t ntify HMRC f a liability t register fr VAT, the amunt f the penalty depends n the reasn fr the errr, and whether any disclsure f it is prmpted r nt. Reasn fr errr Disclsure Minimum penalty Maximum penalty Nt careless N penalty N penalty Careless Unprmpted 0% 30% Prmpted 15% 30% Deliberate but Unprmpted 20% 70% nt cncealed Prmpted 35% 70% Deliberate and cncealed Unprmpted 30% 100% Prmpted 50% 100% The definitin f when an errr is careless is nt helpful as it simply states that it is, if it was the result f a failure t take reasnable care. There is little substantive guidance issued by HMRC n what cnstitutes a failure t take reasnable care but they d say it cannt be identified withut cnsideratin f a given persn s abilities and circumstances. It is therefre subjective. Penalties can be suspended fr up t tw years but if during the perid f suspensin a persn becmes liable fr anther penalty, the suspended penalty becmes payable. Reasnable excuse/mitigatin It is pssible t appeal against the penalties detailed abve if yu have a reasnable excuse fr example, where smething was nt dne as a result f illness r death. The law precludes certain claims fr reasnable excuse such as: reliance n smene else; a lack f funds; r ignrance f the law. Hwever, it is still pssible t appeal against a penalty where yu can shw, fr example, that a lack f funds was caused by unfreseeable circumstances utside yur cntrl r that yur errr was caused nt by ignrance f basic law but f a cmplex area. It is als pssible t claim mitigatin f penalties and yu shuld take prfessinal advice t see what can be dne in the event the rugby club incurs a penalty. Vluntary disclsure Errrs which yu discver in yur accunting recrds can be adjusted n a current VAT return prvided the net errrs d nt exceed the greater f 10,000 r 1% f the Bx 6 turnver up t a maximum f 50,000. Errrs in excess f this shuld be ntified t HMRC in writing and if disclsed in this way shuld cunt as an unprmpted disclsure which culd mitigate a penalty. Interest will, hwever, apply. A fur year time limit applies t vluntary disclsures. If errrs are discvered after fur years there is n legal requirement t 17

18 disclse them. HMRC will nrmally reject claims fr VAT verpaid mre than fur years ag. Assessments If VAT returns are nt submitted r returns which have been submitted are incmplete r incrrect, HMRC will issue an assessment t recver the underdeclared VAT. Assessments are capped t fur years frm the end f the VAT perid in which the errr ccurred. If the rugby club wishes t appeal against an assessment, a lcal recnsideratin f the decisin can be requested within 30 days f the date f the assessment. A frmal appeal can be made t the Tax Chamber f the First-tier Tribunal within 30 days f the date f the assessment. Interest Interest may be charged when yu have paid an assessment which later turns ut t be t lw r when yu have underpaid r verclaimed VAT. Hwever, where a repayment f tax is due and payment is unnecessarily delayed by HMRC, a repayment supplement culd be due t yur club. Disclsure Failure t Disclse A penalty will arise if a business is under an bligatin t disclse either the use f a listed avidance scheme r a scheme which has the hallmarks f avidance. Fr failing t disclse the use f a listed scheme the penalty is 15% f the VAT saved. Fr failing t disclse the implementatin f a scheme which bears the hallmarks f avidance the penalty is fixed at 5,

19 7 Minimising VAT Csts Sme f the ways in which the VAT burden may be minimised are: 1. if nt already registered, vluntary VAT registratin where yur taxable expenditure is high e.g. a capital prject; 2. aviding liability n supplies by analysing supplies int their cmpnent parts and taking full advantage f zer rating; this applies particularly t membership subscriptins-see HMRC Ntice 701/5 Clubs and Assciatins. 3. taking advantage f the available exemptins identified in Sectin 4, but subject t any resulting restrictin n recvering input tax n purchases; 4. aviding the wrst f partial exemptin by: negtiating the best methd f recvering input tax with HMRC; r if pssible, reducing exempt input tax belw the de minimis limit f 625 per mnth; 5. timing utput tax liability e.g. there will be a lnger VAT cashflw benefit fr an invice issued at the beginning f a VAT quarter than at the end. The cash accunting scheme can als be an efficient mechanism fr imprving cash flw; 6. in the case f spnsrship, carefully analysing what is prvided, particularly if the spnsr is partly exempt e.g. a bank, building sciety r insurance cmpany. If part f the spnsrship receipt is nt subject t VAT then this may result in mre net cash fr yu (see paragraph 18 f Appendix 1); r 7. ensuring that VAT is charged where it is due, since, if yu d nt, yu may be unable t recver it frm yur custmer. Any exchange f letters f agreement r cntracts shuld make the VAT psitin clear in relatin t payments under it. It will usually be t a club s advantage t specify that the cnsideratin being charged excludes VAT (which yu then add t the charges). Als, please see Sectin 9. 8 Vat and club charities There are special reliefs fr bth taxable supplies by, and t, charities. These reliefs can prvide valuable cash savings fr charitable rugby clubs and their members. It is pssible fr rugby clubs t register as charities with the Charity Cmmissin and HMRC t take advantage f these reliefs. Further details f this and the benefits generally can be fund n RFU's website [RFU Charities]. Unfrtunately the reliefs are nt available t CASCs (with the exceptins mentined belw). Reliefs n incme Firstly as regards taxable supplies made by charitable clubs there are tw reliefs which are cmmnly used; exemptin fr club playing membership subscriptins and fees and exemptin fr ne ff fundraising events. Bth charitable clubs and CASCs are eligible bdies fr the purpses f exemptin fr club 19

20 playing membership subscriptins and fees (see Appendix 1 paragraph 12). Bth can als treat packages f membership benefits as multiple supplies with different Vat treatment fr each cmpnent supply as apprpriate under special arrangements. Thus if a club prvided a cpy f its zer-rated magazine as part f the membership rights n Vat wuld be due n that part f its membership fee. Vat exemptin is als available t charities and nn- prfit distributing clubs (including CASCs) rganising fund raising events such as fetes, fairs, jumble sales, dances, discs, dinners and barbeques which cme within the special Vat rules fr such events and where the prfits are used fr the club's purpses [see link t HMRC website]. Village Hall relief As regards purchases by, and supplies t, charities there are reliefs which reduce the Vat cts. Prbably the mst imprtant f these is the "village hall " relief under which the cnstructin csts f a new qualifying building incurred by a sprts club charity can be zer rated. This means that the prblems f Vat input tax recvery resulting frm partial exemptin due t exempt playing subscriptins can be avided. T qualify the new building must be in use fr scial r recreatinal purpses in a similar way t a village hall and must meet ther criteria. This relief is nt easy t btain since HMRC may initially reject an applicatin fr zer rating but charitable clubs shuld persevere since many sprts clubs have succeeded in btaining the relief. Other reliefs n purchases Other reliefs n purchases are zer rating f advertising csts and a lwer 5% rate f Vat n fuel and pwer. Charitable clubs can advertise Vat free n radi r televisin, in a magazine r a pster n the supplier s premises. Lw cst label stickers, emblems and badges, pre-printed cllecting bx envelpes and appeal letters all qualify fr the zer rate f Vat. The adverts can be n any subject including staff recruitment. Further relief is available fr private adverts in a charity's brchures r annual reprts where 50% r mre f the adverts in a publicatin are clearly placed by private individuals and nt in a business capacity. All f the sums received can be treated as dnatins utside the scpe f Vat. Charities qualify fr a reduced 5% rate f Vat n the fuel and pwer they use in cnnectin with nn- business activities. Such activities include receiving incme frm dnatins and activities where n charge is made. If 60% r mre f the fuel and pwer supplied is fr nnbusiness activities then the reduced rate will apply t the whle supply. If nt Vat will be charged pr rata based n the business/ nn- business percentages. These reliefs are quite technical in nature and it will usually be wrth taking specialist advice t maximise the benefits frm them. 9 Cmmn Issues Affecting Rugby Clubs Business Entertainment Generally, VAT charged n gds r services is nt recverable where the gds r services are used fr the purpses f business entertainment. Business entertainment includes the free prvisin f fd and drink, htel accmmdatin and entry t sprting r similar events t persns ther than emplyees. An exceptin t the general rule is where a rugby club prvides htel accmmdatin and general refreshments t a visiting team under a reciprcal agreement r where there is a cup cmpetitin and the terms f the cmpetitin prvide fr such a payment. In this case, input tax can be recvered n the assciated expenditure. Business Gifts / Cmpetitin Prizes 20

21 Fr VAT purpses an article is a gift where the dnr is nt bliged t give it and the recipient is nt bliged t d r give anything in return. The gift f business assets by a rugby club fr n cnsideratin is cnsidered t be a business gift. If the VAT exclusive cst f the item is mre than 50 and the VAT has been recvered n the item (as it has previusly been used fr business purpses) utput tax must be accunted fr n the net price the persn wuld have t pay t purchase r prduce gds identical t the gds cncerned, i.e. nrmally their cst value. If the VAT exclusive cst f the item is less than 50 there is n requirement t accunt fr utput tax n the gift. Where there is a series f gifts t the same persn there is n requirement t accunt fr utput tax if the aggregate cst f the gifts des nt exceed 50 made t that persn in the same year (i.e. in a 12 mnth perid). Cmpetitin prizes are als cnsidered t be business gifts where there is n direct and immediate link t a taxable business activity. Cmmunity Amateur Sprts Clubs Fllwing a change in the definitin f charity fr tax purpses which excluded CASCs they can n lnger qualify fr charity Vat reliefs. Crprate Hspitality Packages A crprate hspitality package can cnsist f a number f elements (mst cmmnly a car park pass, fd and drink, a ticket t the match, a club prgramme and a hst). Where separately supplied it is likely that the prgramme wuld benefit frm zer-rating. Hwever, where the prgramme is included as part f a hspitality package VAT is due n the full package including the prgramme. Disciplinary Incme If an individual player breaks the rules f a rugby club they may have the authrity t fine that player. Fines by the Rugby Ftball Unin are utside the scpe f VAT and HMRCs view is that any assciated VAT csts incurred d nt directly relate t a specific supply and that the VAT is recverable t the extent allwed under the partial exemptin rules if applicable. It is likely that this psitin extends t fines impsed n its players by rugby clubs but prfessinal advice shuld be sught t cnfirm the psitin. Lettings f sprts facilities t and by clubs Ordinarily, the letting f facilities fr the paying f sprt is subject t VAT. The rent fr a series f lets t and by the club is exempt fr VAT if certain cnditins are fulfilled, as set ut belw. Hwever, this exceptin is itself verridden if the grantee has pted t tax the land r buildings:- the facilities are prvided fr a series f ten r mre perids; and each perid is in respect f the same activity carried n at the same place (but nt necessarily using the same pitch, curt etc); and the interval between each perid is nt less than ne day and nt mre than 14 days; and 21

22 cnsideratin is payable by reference t the whle series and is evidenced by written agreement; and the grantee has exclusive use f the facilities; and the grantee is a schl, club, an assciatin r an rganisatin representing affiliated clubs r cnstituent assciatins (e.g. a league). HMRC accept an exchange f letters, r an invice issued in advance, as written agreement, but insist that payment must be fr the whle series, with n refund if the lessee chses nt t use the facilities each time. They nly see refunds as permissible in the event f unfreseen nn-availability. They d nt, hwever, insist that payment be made in advance, and accept that it can be made in installments thrugh the series, The rules are quite cmplex but can if applicable reduce nn-recverable VAT n fr example lcal authrity pitch hire fees. When a club rents ut sprts facilities it is ften advantageus t reduce its partly exempt supplies by being able t charge VAT (i.e. aviding the cnditins listed abve fr exemptin). See sectin belw. Receipts frm the RFU The RFU has a ruling frm HMRC that incme received by a club frm the RFU as a grant r in respect f travel expenses is nt liable t VAT as it is nt received by the club in respect f any business supply t the RFU. Such incme is utside the scpe fr VAT. By cntrast receipts frm the RFU by way f reward fr prgress in knck-ut cmpetitins carries VAT which needs t be shwn n yur invice t the RFU. Merchandising The retail sale f gds including shirts, scarves and badges will generally be standard rated unless any f the items qualifies fr zer-rating as children s clthing / ftwear r as relevant publicatins. Zer-rating applies t articles designed as children s clthing and in practice this means clthing and ftwear suitable fr children up t 13 years ld as determined by the British Standards Institutin. Nn-business incme e.g., Grant funding and nn-business expenditure The receipt f incme which is utside the scpe f VAT des nt f itself create a restrictin t VAT recvery. This means that fr example lttery funding can be received with n lss f VAT, prvided that the funding is used fr the purpse f making taxable supplies. Hwever it is imprtant fr clubs t be aware f the VAT implicatins f nn-business activities, as this is a cmplex area f VAT legislatin that may result in restricted VAT recvery. VAT incurred n csts which are used t pursue nn-business activities is generally nt recverable. This is because the legislatin states that VAT n csts can nly be deducted as input tax where it is incurred fr business purpses. Bradly, a nn-business activity may arise where a rugby club is carrying n an activity which des nt invlve the making f supplies fr a cnsideratin and where there is n intentin in future f ding s. An example f such an activity culd be the creatin and running f a yuth academy. The issues relating t nn-business activity are cmplex, and if this is relevant t yur club, we recmmend specific advice be sught. 22

23 Overseas VAT csts Clubs may incur verseas VAT csts e.g., travel and htel accmmdatin as a result f turs. Where the VAT is incurred within anther EU cuntry it may be pssible fr clubs t recver such VAT under a special refund prcedure knwn as the 8 th Directive prcedure. Subject t certain cnditins, VAT incurred in EU cuntries can be refunded peridically prvided the clubs are nt registered r liable t be registered fr VAT in thse cuntries. Fr VAT r similar taxes incurred in nn-eu cuntries a similar prvisin, knwn as the 13 th Directive may als allw VAT recvery. Perimeter Advertising See Appendix 1. Prperty / Cncessins If clubs pt t tax their stadium (see paragraph 19, Appendix 1), the ptin will generally apply t the whle site and will mean VAT must be charged n any letting incme arising frm the stadium e.g., advertising hardings, cncessins, shps, burger vans, health/gym clubs etc. Seasn Tickets The time f supply (tax pint) fr the sale f seasn tickets is the date payment is received (if n tax invice has been issued previusly). VAT must be accunted fr n the full amunt received in the VAT return cvering that perid. Spnsrship Spnsrship incme is nrmally received in the expectatin that the rugby club will have t d smething in return (e.g. prvide advertising, reduced price tickets, hspitality etc). VAT shuld be charged n any supplies f spnsrship made by the rugby club t UK persns. Hwever, where spnsrs belng utside the UK the supply may be VAT free. It is nt uncmmn fr spnsrship agreements t include an element f business entertainment e.g., hspitality. Travel Clubs If a club prvides their supprters with travel facilities t away matches r turs it is pssible that a system knwn as the Tur Operatrs Margin Scheme may apply. This des nt apply if the rugby club acts as agent fr the travel facility prvider and the rugby club shuld accunt fr VAT n the cmmissin it receives. Specialist advice shuld be sught. Value-in-kind/Barter transactins A rugby club may frm time t time supply gds r services free f charge under a value in kind agreement i.e., where it receives gds r services in return rather than payment. Fr VAT purpses this arrangement results in bth parties making t a x a b l e supplies. Where these supplies are taxable VAT must be accunted fr n the full value f thse supplies i.e., it is nt pssible t net ff the VAT amunts due between the parties. Instead bth parties shuld issue VAT nly invices related t the value f their individual supplies. Cmmn examples are: receipt f gds in exchange fr spnsrship (e.g. a sprts nutritin cmpany supplies supplements in exchange fr their lg n yur club shrts); where cars are leased in exchange fr advertising services. Hwever, special rules apply t VAT n cars and a 50% restrictin applies t the recvery f the VAT cst attributed t the value f the cars prvided. 23

24 Yuth Academies Yuth academies and centres f excellence may be established in a legal entity which is separate frm the club. As such, mst f the incme received by the academies e.g. funding/dnatins will be nn-business incme. Cnsequently, any VAT incurred by such bdies will be largely irrecverable fr example, csts incurred in building new facilities. It may be pssible t mitigate irrecverable VAT csts in relatin t such prjects. Specific advice shuld be sught. 10 Planning Pints t Minimise Restrictins n the Recvery f Input Tax Partial exemptin Many clubs have been faced with VAT bills and penalties, fllwing an inspectin, because they were unaware f the implicatins f partial exemptin and the different methds f calculating it. The amunts may be substantial, particularly when VAT has been incurred n capital expenditure. The partial exemptin rules are utlined in paragraph 5.1 abve. Playing activities Membership subscriptins and match fees (where charged) f playing members are an exempt utput (see Sectin 4). This means that, regardless f the level f ther incme, mst clubs will be preparing their VAT returns n a partial exemptin basis. It fllws that there will be sme restrictin n the recvery f VAT n purchases, unless the de minimis amunts apply. Direct attributin f expenditure slely t players subscriptins will result in all the VAT n the expenditure being irrecverable. This can cver items which are substantial and carry large amunts f VAT, such as mwing machines, fldlights, changing rms, gal psts and pitch relaying. Cnversely expenditure directly attributable t standard rated incme e.g. the bar will be fully recverable. Hwever, when expenditure is attributable bth t players subscriptins and ther incme which is taxable r zer-rated, the VAT n the expenditure becmes nn-attributable and ges int the general pt where it is pr-rated accrding t the relative levels f taxable and exempt incme. It is usually the case that exempt incme is nly a small prprtin f ttal incme s that the irrecverable VAT is cnsiderably less than under direct attributin t players subscriptins. VAT fficers are likely t pen by suggesting that all expenditure related t playing facilities is slely attributable t players subscriptins s that the VAT n it is ttally irrecverable. Clubs shuld be aware that, in many cases, it will be pssible t demnstrate that such expenditure is actually nn-attributable. Playing activities in mst cases will als generate taxable incme, either standard rated (e.g. spnsrship f shirts, admissin charges, advertising bards when an ptin t tax has been made) r zer-rated (e.g. prgrammes). Even if nne f these applies, clubs may try t generate t a x able incme by (say) letting the pitch and changing rms t third-parties fr sprts days etc. (A shrt term let is t a x a ble see paragraph 8.6 abve); even a nn-sprting event, such as a summer fair wuld be better than nthing. Attributin HMRC may try t say that expenditure n playing facilities is nt incurred in rder t bring in incme ther than playing members subscriptins. This mtive argument is nt relevant, the relevant test is whether the VAT bearing csts have been used in making bth taxable and exempt supplies. 24

25 Relating playing expenditure t spnsrship may depend n the terms f the spnsrship. Clubs shuld try t imprve their psitin by giving the spnsr publicity in the playing activity (names and lgs n shirts, flags, pst prtectrs etc.). The link with playing activities is reinfrced when individual matches are spnsred and the package includes a mixture f benefits e.g. attendance at the match, prgrammes, advertising in the prgramme and, perhaps, a pre-match lunch. Cirencester RFC The VAT Tribunal has made an imprtant decisin n this issue. Cirencester RFC incurred substantial csts n building a new pitch. HMRC sught t deny the recvery f any VAT n the cst n the cst n the grunds that the expenditure related entirely t members playing activities. The club was able t shw that, in making the decisin t build the new pitch, its bjectives were nt slely the imprvement f playing facilities but als the generatin f t a x able incme frm perimeter advertising and increased gate mney frm imprvements in the level f play. The Tribunal decided that VAT n the pitch building cst was nnattributable and shuld be apprtined in accrdance with nrmal partial exemptin calculatins. Planning In such circumstances, it is imprtant fr clubs t be able t demnstrate their intentin t generate taxable incme at the time the expenditure is apprved. This is because, in mst circumstances, VAT n the expenditure is likely t be reclaimed befre the relevant taxable incme is generated. These intentins are ften best demnstrated by written recrds such as minutes f Cmmittee meetings, feasibility studies and any applicatins fr grants twards the cst. Playing members subscriptins Members wh have ceased t play d nt qualify fr VAT exempt membership fees. It may be helpful t reduce exempt incme by intrducing a differential in membership subscriptins whereby the playing members pay less than the nn-playing. 9.2 Timing f expenditure Use f the de minimis limits if the invicing f a relatively substantial item can be split ver tw accunting years. 25

26 8 Cnclusin Given the wide ranging pwers f HMRC it is imprtant t cnsider the fllwing pints regularly: Shuld the rugby club be VAT registered? If it is nt required t be VAT registered, wuld vluntary registratin be t its advantage? Are yu aware f the crrect VAT treatment f the club s incme? Is this being crrectly applied? Where relevant, have yu agreed the mst beneficial methd t calculate recverable VAT? Are yur recrds up t date? When is the next VAT return due? Are there sufficient funds in the current accunt t cver the next VAT payment? If the recrd keeping is seriusly behind, ask permissin frm HMRC in writing t submit an estimated return rather than incur a financial penalty fr the late submissin f the accurate return. Are there any queries which shuld be reslved with yur prfessinal adviser? D yu have available expertise t challenge HMRC s grunds fr making pstinspectin assessments and charging penalties? This dcument has been prepared in rder t help yu determine whether yu are likely t be affected by the VAT legislatin. T take full advantage f the available pprtunities and avid unnecessary pitfalls yu shuld cnsider cnsulting a prfessinal adviser wh has VAT expertise with any relevant queries. There may be planning pprtunities available t legitimately mitigate VAT r identify pssible VAT savings, ther than thse set ut in sectin 9 abve. 26

27 APPENDIX 1 RUGBY CLUB ACTIVITIES ANALYSIS 1. Advertising Revenue Letting f an advertising harding at a sprts grund r n perimeter fencing is exempt frm VAT. Hwever, it is pssible t pt t charge VAT n exempt lettings. This taxatin ptin is cvered in mre detail belw (paragraph 19). Advertising n a ntice bard r wall display is always standard rated as is advertising space prvided in club prgrammes, magazines and psters. 2. Bar Sales Alchlic beverages, sft drinks, tbacc, crisps and nuts are all standard rated and if yu sell sandwiches r ther fd at the bar t be eaten n the premises r at the grund these will als be standard rated. N VAT is due n tips fr the staff when these are at the discretin f custmers. 3. Caching and Curse Fees The prvisin f caching r refereeing services t members by an eligible bdy (see membership subscriptins and related fees belw) is exempt 4. Cmpetitin Fees Other incme received frm entrance in a sprting cmpetitin is standard rated unless all the cmpetitin fees are returned t the entrants as prizes (mney, gds r trphies), in which case the incme is exempt frm VAT. It is necessary t be careful as this may nt be the case if the entrant is given free use f a facility fr which there is nrmally a charge. 5. Dnatins and Grants When an individual r a business gives a grant, dnatin r award, yu d nt have t declare VAT n the incme if it is freely given and the persn dnating receives n benefit in return. This incme is utside the scpe f VAT. A ne line credit in a sprting prgramme wuld nt qualify as a benefit; hwever, if the dnr receives ther publicity r advertising in return, VAT shuld be declared n the incme (see under Spnsrship ). Grants frm bdies such as Sprt England r UK Sprt are nrmally utside the scpe f VAT prvided the grantr receives nthing in return ther than perhaps an acknwledgement fr making the grant. Dnatins and grants are usually utside the scpe f VAT even if the persn making the dnatin r grant has a nminal say in hw the mney will be spent. See als paragraph Fund raising events Incme frm fund raising events e.g. admissin charges, sales f gds etc is nrmally subject t Vat. Exemptin may be available hwever fr clubs which are charities r nn-prfit making (see paragraph 12 belw) where the event is primarily fr the purpse f raising funds ( nt scial events) and the funds are used fr the benefit f the club. Events which may qualify fr exemptin include balls, dinner dances, fetes, fairs, jumble sales etc. 7. Gaming and Amusement Machines The takings frm gaming machines (fruit machines, vide games, juke bxes and ther cin r tken perated amusement machines) r games f skill have been treated as standard rated. Frm 1st February 2013 Machine Games Duty was intrduced in relatin t machine games prviding cash prizes. They are exempt frm Vat. Takings frm games f chance are exempt (fr example pl betting). A licence is needed t perate certain 27

28 machines and yu shuld seek guidance frm the lcal HMRC ffice r yur prfessinal adviser. If yu receive payment frm a machine wner (either a fixed amunt f a share f prfits) in return fr allwing him t site his machine n yur premises, that incme will be standard rated. 8. Gate Mney and Ryalties The fees yu charge fr entry t a match are standard rated, as are shares f gate receipts frm an away game in the UK (including the Isle f Man but excluding the Channel Islands) and ryalty incme yu receive frm a UK based televisin cmpany fr bradcasting frm yur wn grund. 9. Interest and Insurance Cmmissin If earned, incme received frm mney depsited with banks r building scieties is exempt frm VAT as are insurance r affinity card cmmissins received. Hwever, in a rugby club interest incme is usually classed as incidental which means it can be excluded in any partial exemptin calculatin. 10. Letting f Rms and Prvisin f Catering Charges fr letting a rm fr the purpses f a meeting, seminar r cnference are exempt frm VAT. Hwever, if catering services are als supplied the catering element shuld be separately identified n the invice and VAT shuld be charged n it. It is pssible t pt t charge VAT n lettings and this is cvered in the sectin n the Taxatin Optin (see paragraph 19 belw). Please nte that the letting f facilities fr playing sprt is subject t a cmpulsry VAT charge. The letting will nly be exempt frm VAT if: the let is ver 24 hurs; r there is a series f 10 lets t a schl, club, assciatin r an rganisatin representing affiliated clubs r cnstituent assciatins (and the ther cnditins set ut in Sectin 8.6 abve are met ); and the rugby club has nt pted t charge VAT. The prvisin f meals (ht r cld and including drinks) fr cnsumptin n the premises t club visitrs is always standard rated. Cld take-away fd is zer-rated. Hwever, fr this purpse, fd and drink is nt deemed t have been taken away when it is cnsumed within the rugby grund where it is purchased. 11. Ltteries Charges t take part in ltteries and raffles r games where prizes are awarded by chance and n element f skill is required by participants are exempt frm VAT. Lttery funding grants are utside the scpe f VAT. 12. Membership subscriptins and related fees Membership subscriptins are standard rated, unless they are within the exemptin fr sprting and physical educatin services supplied by eligible bdies. Bradly an eligible bdy is nn-prfit making (i.e. nn-incme distributing) with a cnstitutin which has a nndistributin clause r limits any distributin f prfits r surpluses t its members n a winding up r t anther nn- prfit making club. It must als use its prfits r surpluses fr the purpses f the club. The exemptin nly applies t thse services clsely linked with and essential t sprt and recreatin. Hence it wuld apply t playing membership subscriptin, 28

29 jining fees and match fees but nt scial r nn-playing membership subscriptins. Details can be fund in HMRC Vat Ntice 710/45 " Sprt". 13. Overseas Turs If the rugby club turs utside the UK the incme received in respect f sprts appearances is utside the scpe f UK VAT. Fr VAT purpses, the Isle f Man is part f the UK but the Irish Republic and the Channel Islands are nt. If the rugby club receives incme frm verseas turing it may have a liability t register and pay lcal VAT in the hst cuntry. If in dubt yu shuld check the lcal tax regulatins with yur prfessinal advisers. It may als be pssible under certain circumstances t claim repayment f lcal VAT/sales taxes n htel bills etc. If this applies t yu, it is recmmended that yu seek prfessinal advice frm ne f the agencies specialising in such recveries. 14. Prgrammes and Fixture Cards Fixture cards and prgrammes are zer-rated when the prtin fr cmpletin f results etc. is nt mre than 25% f the ttal area, therwise they are standard rated. 15. Renting r Leasing Out Premises If the rugby club has spare ffice capacity r a prperty which it lets ut fr investment purpses the rent r lease payments received in respect f thse premises is nrmally exempt frm VAT. It is pssible t pt t tax these (see paragraph 19 n the taxatin ptin ). 16. Sales f Assets Prceeds frm the sale f rugby club assets such as a pl table r a cmputer are nrmally standard rated. 17. Shp Sales Sales f sprts equipment, clthing, suvenirs, ht fd, sweets and sft drinks are all standard rated but bks, newspapers, children s clthing (including kit) and cld take- away fd are zer-rated (prvided the fd is nt cnsumed in the rugby grund where it was sld). If the rugby club sells bth standard and zer-rated gds yu shuld recrd the sales separately as yu need nly declare VAT t HMRC n the standard rated sales. Where the vlume f sales means that a detailed recrd is unwrkable yu shuld cnsult with yur lcal VAT ffice r prfessinal adviser as t hw best t calculate the VAT due. Clubs may cnsider intrducing retail schemes t establish the VAT liability t HMRC n retail sales frm its shp. Whilst retail schemes are simplificatins fr VAT accunting purpses they can, in sme circumstances, ptentially achieve VAT savings r cash flw benefits. 18. Spnsrship Spnsrship is standard rated incme fr VAT purpses when it is received in return fr a supply (e.g. advertising in a prgramme). Often a rugby team will agree t wear a prduct name n a team shirt r feature publicity in a sprting prgramme fr a business r prducts. T decide if incme is spnsrship incme, a rugby club shuld cnsider if a supply r benefit is given in return. VAT will als be due if smene gives yu gds r services (e.g. team strips r equipment) in return fr advertising r ther benefits. If a spnsrship package cvers a number f separate supplies (tickets, meals and drinks, perimeter advertising bards etc.) it is pssible that VAT will nt be due n the ttal value. Fr example a perimeter advertising bard can be exempt subject t the ptin t tax (see paragraph 19 belw). 29

30 This will benefit thse custmers which are unable t recver all f the VAT the rugby club will charge, i.e. thse that receive the package fr business entertainment and thse which are partly exempt. Since such custmers will ften nly pay yu a ttal sum inclusive f VAT yu may benefit frm carefully reviewing what yu prvide t see whether any elements are eligible fr VAT relief. In all cases it is wrth analysing the varius elements f the spnsrship package t determine the crrect VAT treatment. If spnsrs are VAT registered the rugby club will be required t issue a tax invice identifying the VAT being charged s the spnsr can reclaim this frm HMRC where applicable. 19. Taxatin Optin It is pssible t pt t charge VAT n land and cmmercial lettings which wuld therwise be exempt frm VAT by exercising the ptin t tax. It shuld be nted that the ptin t tax cannt be used in respect f dmestic/residential accmmdatin r accmmdatin which is used by a charity fr a nn-business purpse. The advantage f pting t tax is that if the incme is standard rated rather than exempt, VAT n cnnected csts can be recvered (see Categries f incme ). Hwever, nce the ptin t tax has been taken up it is irrevcable fr 20 years and must apply t all future lettings r sales f the whle r any part f the prperty. It is recmmended that yu seek prfessinal advice befre electing t take up the taxatin ptin as prperty transactins are gverned by sme f the mst cmplex aspects f VAT legislatin. Fr example, the ptin t tax can de disapplied in relatin t certain supplies if the develpment is funded and ccupied by a business using it fr mainly VAT exempt purpses. In additin, valuatin can be an imprtant factr where the supply is made t a cnnected persn and inducements and rent free perids can als crystallize a VAT liability. T pt t tax yu need t ntify the Natinal Optin t Tax Unit, based in Glasgw, in writing. If yu have already made VAT exempt supplies in respect f the prperty yu will need t seek permissin frm HMRC. Where a rugby club pts t tax its stadium the ptin cvers the stadium and immediately surrunding land. Therefre, a bar r shp franchise within the stadium perimeter will als be subject t the ptin. 20. Telephnes Telephne service prviders, such as British Telecm, are respnsible fr the VAT n supplies made frm many f the ld cin-perated telephnes which clubs rent frm them. But if the rental is f ne f the style f installatins such as Payphne 100, 300 r 500, the mney remved is fr the club s supply t the public and VAT shuld be accunted fr n the takings. 21. Vending Machines Vending machine sales f items such as ht drinks, sft drinks, sweets, crisps etc are standard rated. If yu receive payment frm a vending machine wner (either a fixed amunt r a share f prfits) in return fr allwing him t site his machine n yur premises, that incme will be standard rated. 30

31 APPENDIX 2 VAT RETURN FORMAT Bx 1 VAT due n Sales Bx 2 VAT due n EU Acquisitins Bx 3 Ttal VAT due t HMRC Bx 4 VAT n Purchases Bx 5 Net VAT due t HMRC Bx 6 Net Sales Bx 7 Net Purchases Bx 8 Value f EU Sales Bx 9 Value f EU Purchases 31

32 APPENDIX 3 Services purchased frm utside f the UK Services supplied where received ( Reverse charge services). Where services are supplied by a UK rugby club t a business utside the UK they are utside the scpe f VAT. Where these services are bught in frm utside the UK, the rugby club must, if registered; self assess UK VAT using the reverse charge. If the club is nt VAT registered then the value f the purchases cunts twards the VAT registratin limit. The way the reverse charge wrks is simply that VAT at the apprpriate rate is calculated n the value f the purchase. This VAT is shwn as if it was VAT n a sale by the club, and als as if it was VAT n a purchase frm a UK supplier. If the purchase related t smething n which VAT wuld be fully recverable, it is claimed back s this is little mre than a paper exercise. But, if it related t smething used in making an exempt supply, e.g. sprts cnsultancy, the VAT that the club has had t charge itself wuld be either fully r partly irrecverable. In ther wrds this prvisin prevents a partly exempt club frm aviding VAT it cannt reclaim simply by shpping abrad. The reverse charge prvisin des nt apply t the fllwing supplies f services: 1. Cultural, artistic, sprting, scientific, educatinal and entertainment services. These are seen as being supplied where they are perfrmed. 2. Land related services. These are seen as being supplied where the land in questin is situated. 3. Hire f means f transprt. Shrt term hire f a means f transprt is nt cvered by the reverse charge and supplied where the vehicle is put at the custmer s dispsal. 4. Restaurant and catering services. These are supplied where they are perfrmed. A prblem may arise in that where a service which is subject t the reverse charge is supplied by a business in anther EU cuntry t a business in the UK, the verseas business shuld nt charge yu VAT in their cuntry, because the UK business will be accunting fr UK VAT using the reverse charge. But, if the UK club is nt able t prvide its verseas supplier with a UK VAT registratin number, it is likely t be charged verseas VAT which it cannt recver. 32