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bigduckontax
bigduckontax, Accountant
Category: Tax
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Could you clarify or point me in the right direction

Customer Question

Hi
Could you clarify or point me in the right direction to obtain an answer to:
Should VAT be applied to the sale of 'tokens' at the point of sale and / or at the point of redemption?
We are planning to introduce a 'token' scheme where tokens are purchased (with a sliding scale of value - the more you purchase, the cheaper they become to purchase - but retain the 'face value) and then used to access numerous different types of professional training training courses (CPD); both online and in a classroom.
We will not be providing the training, simply acting in the middle akin to an agent.
The training will be purchased by individuals / schools / etc
Your thoughts and direction would be very much appreciated.
Submitted: 2 years ago.
Category: Tax
Expert:  bigduckontax replied 2 years ago.
Hello, I am Keith, one of the experts on Just Answer and happy to be able to assist you with your question. Assuming that the ultimate sales with the use of the tokens are standard rated then the sale of tokens is similarly rated. Book tokens for example, books being a zero rated supply, are zero rated on sale. I am sure you see the connection. Thus the whole VAT on tokens swings on the CPD courses you offer and their VAT rating. The VAT treatment of tokens follows the VAT treatment of the training course. The use of tokens will still aid the cash flow of both the training organization and the student. I do hope that my answer has cleared the air for you.
Customer: replied 2 years ago.

Hi Keith

Thank you for your answer, but just to clarify some other parts of my question:

Would the VAT be applicable at point of sale (individual or company) or at the point of redemption?

It appears that if a School was to purchase training with their Government funding, in this instance it would be exempt; but if a teacher purchased the training, it is standard rated. Could we administer both scenarios under a typical company VAT registration?

Finally, as we are in effect making a commission from the sales of the tokens for training courses; what VAT be applicable on our purchase price? Our sales price? Or as I have seen on some HMRC information, only on our commission element?

Many thanks

Roy

Expert:  bigduckontax replied 2 years ago.

VAT is payable Roy, if appropriate, at the point of token sale.

There is no problem in two types of training rating being operated under the same VAT umbrella. However careful invoicing and book keeping will be required. For example, I run the accounts of two companies who make varying supplies. I have ledger headings for 'fees stanndard rated' and 'fees zero rated' for example.

I had not been aware from your initial question that we were dealing with a commission situation. Normally your VAT would only apply to your commission element only. You could, in theory, operate the other fees as a sort of third party banker. I did this once for a holding company. On a VAT inspection I carefully expained the accounting to the Inspector who said he understood. He then proceeded to add up all the moneys coming in to the bank account. I asked him what he thought he was doing and he assured me that this would give him the amount of output tax created. There then followed a bill for 2K underpaid VAT which was the subject of an immediate appeal and rapidly cancelled. Accounting for the token sales will involve a lot of book keeping and for each sale or their aggregation then an invoice will have to be raised to reduce the VAT on those sales to zero.

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Expert:  bigduckontax replied 2 years ago.
Thank you for your support.

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