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Where Taxpayers and Advisers Meet

VAT on Training & Mentoring Program

john_27
Posts:5
Joined:Fri Jan 06, 2017 3:41 pm
VAT on Training & Mentoring Program

Postby john_27 » Fri Jan 06, 2017 4:11 pm

Hi,

Hoping I can get some advice.

I became VAT Registered on 1st July 16, and understand that you cannot claim for services more than six months before VAT Registration.

The nature of my business is an an online business where I source from and sell consumer goods in the US only.

My question is that I paid for an online-business training course (3-day classroom based) and an on-going 12 month mentoring/training program for which I paid VAT as per:

1) Course - attended April 2015 (paid in full - March 15)
2) Mentoring/Training Program - Months 1-6 - period Jul 15 - Dec 15 - paid in 3 instalments - Apr/Jun/Jul 15
3) Mentoring/Training Program - Months 7-12 - period Jan 16 - Jun 16 - paid in 3 instalments - Sep/Oct/Nov 15

The 12m mentoring program ended effectively on 30th June 16, one month before my VAT Registration.

Am I able to reclaim VAT on the initial training course and the 12m mentoring program given that I was using the mentoring/training up until end of June 16, one month before my VAT Registration?

PS - my limited company was formed on 1st July 15.

Many thanks in advance.

John

les35
Posts:635
Joined:Wed Aug 06, 2008 3:09 pm

Re: VAT on Training & Mentoring Program

Postby les35 » Sat Jan 07, 2017 4:10 pm

Was the training program related to your subsequent business activity?
If so, then you will need to look at the tax point(s) for the program. Only if the tax point for the program (in part or whole) fell within the 6 month period can you claim the input tax.
Just to complicate matters; you stated that you set up a limited company. Is this registered for VAT, or are you registered as a sole trader? You can only claim VAT on the training program if the supply was made to the same legal entity which became registered for VAT.
Hope that helps you reach a decision.

john_27
Posts:5
Joined:Fri Jan 06, 2017 3:41 pm

Re: VAT on Training & Mentoring Program

Postby john_27 » Mon Jan 09, 2017 10:52 pm

Hi les35,

Thanks for getting back to me.

The training and mentoring program was directly related to my subsequent (and ongoing) business.

My limited company was formed on 1 July 15 and became VAT Registered on 1 July 16, the initial training and mentoring program were invoiced to me directly as an individual as the company was only formed in July 15.

So in summary, parts 1 & 2 in my original post were invoiced to me directly and part 3 to the company (pre VAT registration).

I did benefit from the services of the mentoring program up until 30 June 16, one month before VAT Registration.

Hope this helps.

Thanks again, John

les35
Posts:635
Joined:Wed Aug 06, 2008 3:09 pm

Re: VAT on Training & Mentoring Program

Postby les35 » Wed Jan 11, 2017 10:28 am

Date of registration 1 July 2016; 6 month rule means that only supplies whose tax points fell into the period 1 Jan to 30 June 2016 can be claimed. The pre-payments mean that the tax points all fell into 2015.
One solution would have been to back date the company registration to the date of incorporation. That will be difficult to do now, assuming you registered voluntarily.

john_27
Posts:5
Joined:Fri Jan 06, 2017 3:41 pm

Re: VAT on Training & Mentoring Program

Postby john_27 » Wed Jan 11, 2017 11:13 am

Hi les35,

Thanks again for your helpful advice, I really appreciate it!

I registered voluntarily for VAT on 1 July 16, so I guess my fault for not registered earlier and will let this go now.

Thanks again for your support and all the best.

Kind Regards, John

Lavender2306
Posts:21
Joined:Mon Dec 12, 2016 11:03 pm

Re: VAT on Training & Mentoring Program

Postby Lavender2306 » Sat Jan 14, 2017 7:32 pm

Hi les35,

Thanks again for your helpful advice, I really appreciate it!

I registered voluntarily for VAT on 1 July 16, so I guess my fault for not registered earlier and will let this go now.

Thanks again for your support and all the best.

Kind Regards, John
Hi John,

There is also such term as pre-incorporation input tax. See SI 1995/2518 reg 111(1b) and HMRC's own manual VIT32000.

As long as the courses directly relate to your business:
1. You can claim input VAT in full on your classroom course, paid in Mar 2015, within six month of the incorporation date, 1 July 2015.
2. You can also claim input tax partially on your online courses supplied Jul15-Dec15, paid April and June 2015, as supplied within six months of the incorporation date 1 July 2015.

john_27
Posts:5
Joined:Fri Jan 06, 2017 3:41 pm

Re: VAT on Training & Mentoring Program

Postby john_27 » Sun Jan 15, 2017 11:13 pm

Hi Lavender2306,

Thanks for your advice on this matter, really appreciate the pointers.

Am I not able to claim VAT on the second part of the training provided between Jan 16 - Dec 16, which I paid for in Sep/Oct/Nov 15, but was for services provided within six months of the VAT Registration date - 1 July 16?

Thanks, John

spidersong
Posts:352
Joined:Wed Aug 06, 2008 4:05 pm

Re: VAT on Training & Mentoring Program

Postby spidersong » Mon Jan 16, 2017 5:23 pm

Pre-incorporation Input Tax is subject to the same rules as pre-registration Input Tax i.e. where VAT is incurred pre-incorporation it must be incurred less than 6 months (on services) prior to the date of registration to be recoverable, so you'd still only be able to recover VAT as per Les' post of Jan 11.

Reg. 111 does not give a blanket recovery of pre-incorporation VAT 6 months prior to incorporation irrespective of the date you register for VAT. Reg 111 (1) b is actually subject to Regulations 111 (2) and 111 (3), and 111 (2) says "No VAT may be treated as Input Tax... in respect of services which had been supplied...more than 6 months before the date of the taxable person's registration". The date of incorporation is therefore only relevant where it is less than 6 months prior to the date of registration, which yours isn't.

The HMRC Manual says this "A company can claim VAT on those goods and services if the tax relates directly to the business to be carried on by it following incorporation and registration for VAT. The six-month limit in respect of services and the four year limit for goods also apply to pre-incorporation claims", the important point is that the timing is not an either /or thing for incorporation and registration, it's referring to where registration takes place at the same time as incorporation. It wouldn't make sense if the two dates were separately referenced and claimable, as then a limited company might set up on 1st July 2008 and not register till 1st July 2016, they wouldn't get to recover VAT on services for both 1st Jan 2008 to 30th June 2008 (6 months prior to incorporation) and 1st Jan 2016 to 30th June 2016 (6 moths prior to registration)!

So you're able to claim on neither part of the training as although you may have physically taken the course within 6 months of registration the time of supply is the earlier of when you take it, the supplier invoices it, or you pay for it, and the earliest of those dates is Sep-Nov 2015 more than 6 months before you registered.

Lavender2306
Posts:21
Joined:Mon Dec 12, 2016 11:03 pm

Re: VAT on Training & Mentoring Program

Postby Lavender2306 » Tue Jan 17, 2017 1:37 pm

Hi Lavender2306,

Thanks for your advice on this matter, really appreciate the pointers.

Am I not able to claim VAT on the second part of the training provided between Jan 16 - Dec 16, which I paid for in Sep/Oct/Nov 15, but was for services provided within six months of the VAT Registration date - 1 July 16?

Thanks, John
Hi John,

The tax point for your courses is when you made a payment, because you made pre-payments. Had you paid the courses after you attended the class or after the online courses were provided, then the tax point would have been as per the invoices from the courses provider.
However, unfortunately, I have to agree with spidersong's arguments on why you actually can't claim input tax on any of the courses.
Apologies for misleading you. I missed the time limit point when I read both Reg and the HMRC's manual.

john_27
Posts:5
Joined:Fri Jan 06, 2017 3:41 pm

Re: VAT on Training & Mentoring Program

Postby john_27 » Tue Jan 24, 2017 11:50 am

Hi spidersong, Lavender2306,

Apologies for the late reply, I was on leave last week and have just read both of your comments.

Thank you both for your feedback and advice on this matter which has really helped me to both understand and now close this issue.

All the best.

Kind Regards, John


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