Not VAT registered, so why am I paying it??

[LoganLoCoCoach]

Hello all, I need a little bit of help. Here's a little background: See I run a small personal training business on the side of my day job, nothing too big& it doesn't turn over much, it's more of a hobby than a career. I use a studio to train my clients in, the owner of the studio also owns a gym and charges me 30% of my earnings for the use of his space. Collectively the studio and the gym he owns turns over way more than the £85,000 VAT registration bracket. I myself am a sole trader, separate to the studio/gym business, I do not turn over anything near that bracket.

All of my income from clients goes into the studio's business bank account, I then invoice them at the end of the month and they will transfer me the money minus the 30% cut. I have been paying VAT on this money ever since I started with the studio. I'm not the most business savvy guy so I'm not sure if this is correct to start with but the plot thickens. When I started with the studio, the owner assured me that eventually he was going to separate the gym and the studio in to two different business entities, at that point I will no longer have to pay VAT because the studio (which I am affiliated with) will not be VAT registered due to turning over less than £85,000 per year whereas the gym (Which I am not affiliated with) turns over more than that and will remain VAT registered. This actually happened in January, so the studio and the gym are completely separate entities now, and I was only in contract with the studio however the owner has continued to charge me VAT. My hourly rate is £40 per hour, and he charges me £5 VAT for every hour worked.

My issue is that for the whole time I was using the studio, I have been paying VAT even though I am not VAT registered because I was under the impression that due to the studio/gym business being VAT registered, I too would have to pay it. Now that the studio is not VAT registered, I am still being charged VAT and I'm adamant that I'm being hard-done-by, can anyone advise on whether I'm supposed to be paying it? And if not what do I do?

[bd6759]

The VAT registered supplier has to pay VAT, not you. Naturally the supplier passes that cost on to you. If you were VAT registered, you could claim it back, but you would need to pay VAT on the fees you charge.


If the studio is not VAT registered he cannot add VAT onto his invoice. You'll need to discuss that with him.