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bigduckontax
bigduckontax, Accountant
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In the UK if a members owned, not club makes significant

Customer Question

In the UK if a members owned, not for profit club makes significant improvements to its course through the us of landfill how much of the VAT on the costs of the improvements can be claimed?
Submitted: 2 years ago.
Category: Tax
Expert:  bigduckontax replied 2 years ago.
Hello, I'm Keith and happy to help you with your question. The glib answer is as long as the proverbial piece of string.
All the VAT paid on the costs of improvements can in theory be claimed as input tax. The not for profit club would charge members and others for the use of the course (green fees), subscriptions etc to provide output tax against which the input tax paid is set, the balance being paid to or from HMRC quarterly. However, the amount reclaimed may be restricted as many not for profit organisations do not register for VAT at all (in which case no reclaim is possible) and many who do have large exempt outputs, particularly amongst members. Where exempt outputs occur the amount of input tax which can be reclaimed is proportional to the exempt outputs viz a viz the standard, reduced or zero rated outputs. Thus if half the outputs were exempt and half standard, for example, rated then only 50% of input tax could be reclaimed.
I do hope I have been able to shed some light on your question.
Expert:  bigduckontax replied 2 years ago.
Afterthought, catering can be a significant source of VAT output tax; should have mentioned it!
Customer: replied 2 years ago.

Thanks for that.

My query is more concerned with the construction of a new course on land we already own. We have planning permission to construct a 6 hole academy course mainly for use by juniors. This will use landfill for contouring the course.


The current plan is to bring in 3200 lorries each containing 10 cu meters of landfill. The average charge for those will be £140.00 per lorry plus VAT providing an income of £448.000 and VAT payable of £89,600

To comply with the planning application requirements, procure the landfill and build the 6 hole academy course will cost approximately:

Consultancy and project management fees £115.000

Enabling work for the lorries £30,000

Course construction £200.000

My real question is what VAT will we be able to claim back on the £345,000 construction costs?

Thanks in anticipation
Expert:  bigduckontax replied 2 years ago.
I have already given you my answer, in theory 100% of input tax may be reclaimed. Exempt outputs may, of course, severely limit this. The principle is the same even though the figures may be high, but that is how VAT works.
In view of the huge expenditure involved it might be an idea to approach HMRC with a view to making monthly as opposed to quarterly returns to improve cash flow. I was involved with an omnibus company whose fares were zero rated supplies and inputs reclaimed monthly.
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Customer: replied 2 years ago.

In the examples I gave what are the exempt outputs.

Thanks again and this will be my last query

Expert:  bigduckontax replied 2 years ago.

Exempt outputs frequently occur where not for profit organisations operate. Larking Gowan (Chartered Accounts) give an example:

'There are a number of places in the VAT legislation where exemption is available for particular supplies only when they are made by an “eligible body”. For example supplies of education, sports services or cultural services. The definition of an eligible body may vary slightly from one section of the legislation to another, but a common part of that definition is that the body must be not for profit (“NfP”). That is to say, a profit can be made, but it must not be distributed. Furthermore, any profit must be applied only to the continuance and improvement of the supplies of the same description that gave rise to the exemption.'

From this it follows that a large proportion of your club's outputs might be exempt. Only the use of club facilities by outsiders would be standard rated. Thus the proportion of input tax would be substantially reduced. You can read the full article here:

http://www.larking-gowen.co.uk/blog/not-for-profit-the-problematic-world-of-vat-exemption/

bigduckontax and other Tax Specialists are ready to help you
Expert:  bigduckontax replied 2 years ago.
Thank you for your support.

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