Posted on 27 May 2014 by Education Finance
VAT codes on FMS
We‘ve been looking into setting up new VAT codes on FMS but they may be a little cumbersome to set up so we are trying to ascertain whether there is sufficient need for the new codes. The codes are for a reduced VAT rate on income and EU purchases.
5% reduced rate for income
A few schools have requested that we set up a 5% VAT code for income as at the moment they have to do an adjustment on the system using the 20% VAT code to get to the right amount of income VAT. We would like to understand how many schools use a 5% VAT income rate and if getting this new rate on the system will offer a time saving?
We also need to identify purchases made from the EU as there are special VAT arrangements for trade between countries. If you order goods from a current EU member state that is VAT registered in their own country (making sure it doesn’t have a UK VAT registration number, for example through a trading subsidiary) you will need to give the supplier our VAT registration number when ordering goods. Then as part of this EU-wide scheme, the supplier will not charge VAT on the goods. However, we are obliged by HM Revenue and Customs to accurately identify EU purchases on the Council’s monthly VAT return. Therefore we need to set up a special code for EU purchases. Could you please contact us if you have recently made or are likely to make any purchases from EU member states through this scheme so we can understand how many schools are involved.
Income from sports lettings are subject to VAT unless they meet very strict conditions for block bookings which would make them Exempt from VAT (code 8). There has been some discussion at national level on the detail of the Exemption conditions which we are clarifying below. In order to be Exempt from VAT all of the following conditions are met:
- there are 10 or more sessions booked – see note 1
- each session is for the same sport or activity
- each session is in the same establishment, but can be on a different court, pitch or swimming lane
- there is an interval of at least 1 day, but no more than 14 days between lets
- the charge for the letting is based on the whole series of lets even if payments are made in instalments
- the hirer is a school, club or an organisation representing affiliated clubs or associations – see note 2
- the person to whom the facilities are let has exclusive use of them during the sessions
Note 1 – If the booking conditions allow the group to cancel a session and get a refund, then this will nullify the condition of 10 or more bookings and will mean that VAT will have to be charged on the whole booking. Unfortunately this applies even if they don’t actually cancel any sessions – the fact they would be entitled to a refund will stop the Exemption conditions being applied. However, if your booking conditions do not allow a refund for cancellations then the Exemption will still apply for 10 or more bookings. The Exemption will also still remain in place if it is the school that has to cancel a session e.g. due to repairs or flooding.
Note 2 -Exemption only applies to schools, clubs and associations so block bookings by individuals or private companies are not entitled to the VAT Exemption and VAT must be added to the booking.
Charging for Expenses
We have had some recent clarification on charging for expenses. If you are recharging staff costs to an external organisation and adding expenses such as extra mileage to the charge, then the VAT treatment for both the staff cost and expenses is as follows:
- non-teaching staff recharged to any external organisation – standard rated
- teaching staff recharged to another teaching body such as an academy school, college or university – exempt for VAT (code 8)
- teaching staff recharged to any other organisation such as Babcock – standard rated
- payments from colleges / universities to cover supply costs for teaching staff who are training at the college / university – outside of scope (code 9).
Sale of iPads
Advice has been received from HM Revenue and Customs that if you sell iPads to students then you must add VAT to the charge as there are only extremely limited occasions when VAT would not be passed on.
General income collection
Just a general reminder that if you collect income on a system that doesn’t account for VAT then you must remember to account for any VAT manually. Examples might be payment for staff hot meals. If you require any assistance with this, please feel free to contact the VAT team.
Have any schools swapped old items of equipment for new whiteboards or other new equipment with a company called AV Concepts? If so could you please contact us as we need to make sure VAT has been accounted for correctly.
Purchases from Amazon
All schools are reminded that, where possible, purchases should be made directly through the school, however on occasion where staff make purchases through Amazon and eBay and reclaim sums from petty cash then the following general advice should be noted:
- For purchases directly from Amazon: where staff have ordered and paid for goods themselves, the school name and address should appear on the order form and delivery note, for example as the delivery address. This provides a “cleaner” audit trail for purchases. In order to recover VAT the delivery note must be attached to the petty cash paperwork as, for Amazon, this is a valid VAT receipt as it contains all the relevant information such as VAT registration number (note: this isn’t a general rule on delivery notes for all suppliers as it depends on which document acts as the valid tax document). The order form alone is not sufficient evidence in order to recover VAT.
- For purchases from eBay or Amazon market place: most of these other suppliers will not be VAT registered and therefore VAT is not charged and so cannot be reclaimed on these purchases. Some marketplace suppliers are VAT registered so it is worth checking with them for larger purchases.
- Please note that as VAT is not recoverable on most marketplace purchases, it is worth reminding staff who place these orders to check whether it would in fact be cheaper to purchase from Amazon or another VAT registered supplier instead as the net cost to the school after recovering VAT might be lower than the marketplace supplier. For example:
– Amazon price: £50
– Marketplace price: £45
VAT is recoverable from Amazon (with valid paperwork) so the net cost to your budget is £41.67 which would make the item cheaper than the marketplace supplier.
Climate Charge Levy
If you are a VA or VC school please check your energy bills and make sure you are not being charged CCL. If you have been charged incorrectly, please send over a copy of the invoice(s) and we will try and recover the CCL for you.
VAT only invoices
If you receive a VAT only invoice from a supplier, could you please contact the VAT Team before processing the invoice.
We have started a programme of visits to primary schools to check the VAT treatment on spending and income so you may be contacted soon to arrange a visit. We will look at creditor payments, petty cash and income to make sure you are recovering all the VAT you are entitled to and are correctly accounting for VAT on income. It also helps the Council demonstrate to HM Revenue & Customs that we carry out compliance work.
Please get in touch with us about any of the above or any other VAT queries you may have on email@example.com or on 01392 382842 or 01392 382410.
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