Glyn Edwards AIIT

VAT Consultant

Question:

What makes lap-dancing clubs interesting?

Answer:

VAT!!!!!VAT!!!!!

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The Tri-Partite Relationship

The Club Customers

Dancers

Door fee & bar

Cash for Chips

Chips or cash for dances/ ‘sit-downs’

Chips for Cash

Licence Payment

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‘Services to the Salon’ Structure

Hair Salon Customer

Stylist

Supply (say £100k p.a.)

Subcontract or employee

(say £50k)

Lost VAT £14k

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‘Services to the Customer’ Structure

Hair Salon Customer

Stylists

Chair Rent/Use of Facilities

(£50k)Supply (£50k)

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Taxi Firm as Principal

Taxi Firm Customer

Taxi Driver

Supply (say £100k p.a.)

Subcontract or employee

(say £50k)

Lost VAT £14k

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The Taxi Firm as Agent

Taxi Firm Customer

Driver

Radio Rental & Commission

(£50k)Supply (£50k)

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The Taxi Firm as Agent & Principal

Taxi Firm

Private Customers

Driver

Radio Rental & Commission

(£50k)

Cash

Business Customers

Account

Driving Services

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Agency is most effective when…..

Customers are unable to reclaim VAT

Contractors are operating below Registration threshold

BUT – Customs hate any VAT-saving device and regard agency as a risk to the revenue

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Agency – Getting It Right

1. Always have written agreements

2. The principal must be know the value of their supply and the amount of any commission

3. Negotiation – this is key in the Spearmint Rhino decision

4. Control – the principal must be able to control his business as far as possible

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Other Examples of Agency

Staff agencies – where customer cannot claim VAT e.g. health, banking

Massage parlours

Education – to benefit from the exemption for individual teachers

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Medical Staff

Alert for medical staff agencies

….Supplying staff as principal

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Typical Arrangements

Staff Agency Hospital/Care Home

Self-employed Doctor/Nurse/Auxillary

Invoice incl m/up

Invoice

Past treatment: VAT exempt either as:

1. Services of a medical practitioner/registered nurse

2. Care in an approved institution

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Is It Right?

Staff Agency New housebuilder

Self-employed Bricklayer

Invoice incl m/up

Invoice

The supply from the agency to the new house builder is a supply of staff: VATable irrespective of the what work the bricklayer performs

Instruction & Control

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What Has Changed?

University of Glasgow NHS trusts

Consultants

(Medical Lecturers)

Invoice incl m/up

Tribunal found that this was a taxable supply of staff!!

Instruction & Control

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The “Misdirection” Concession

If a Customs and Excise officer, with the full facts before him, has given a clear and unequivocal ruling on VAT in writing or, knowing the full facts, has misled a registered person to his detriment, any assessment of VAT due will be based on the correct ruling from the date the error was brought to the registered person's attention.

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The “Misunderstanding” Concession

VAT undercharged by a registered trader on account of a bona fide misunderstanding may be remitted provided

(a) the tax has not been knowingly evaded;(b) there is no evidence of negligence;(c) the misunderstanding does not concern an aspect of the tax clearly covered in the guidance published by Customs and(d) the tax due was not charged, could not now be

expected to be charged to customers, and will not be charged.

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