VAT on fishing lake

[petergibbinson]

Slightly complicated one I don't fully understand....I own 50% of a lake that is also 50% owned by a bigger fishing business (call it fishing inc)
Agreement drawn up that all income (i.e fishing memberships) is split 50:50 between me as an individual and fishing inc, and all costs are also split 50:50 with me and fishing inc.
However as the bigger fishing business (fishing inc) that owns 50 % of the lake with me is VAT registered the total income for the lake (circa 10k) they then pay 2k of VAT to the HMRC, and hence my share of income is only 4k..(they are saying total income is 10k minus 2k VAT...hence my share is 4k)
similarly with costs they have been told they have to charge me VAT (so if we employ someone that costs 1k in total, that becomes 1.2k and my share of the cost is 600 GBP)
I've never had to deal with VAT before, and this separate lake we jointly own falls under their bigger business from their perspective..but surely my share of the income shouldn't have VAT deducted from it, and VAT is only liable on their portion of the income and expenditure? Or am I missing something?

[section 44]

Agreement drawn up that all income (i.e fishing memberships) is split 50:50 between me as an individual and fishing inc, and all costs are also split 50:50 with me and fishing inc.

...sounds like a partnership ...sounds like the partnership ought to be VAT registered

[petergibbinson]

well the turnover isn't high enough on that lake for it to need to be VAT registered...and I'm a recipient of half the income, liable for half the costs.. via just a written agreement (that I drew up)..

[section 44]

I see, the partnership doesn't need to be VAT registered then

[jpcentral]

It sounds to me as if the OP thinks it is a partnership but Fishing Inc don't.

I think the first thing to establish is whether the "partnership" has been registered with HMRC. Does it have a separate UTR? Does it complete a partnership tax return? If those don't apply, it is not going to be a partnership for VAT purposes.

If it is not a partnership I can understand why Fishing Inc want to be absolutely certain that they stay within the law so it is safer to assume that everything is subject to VAT.

Fishing Inc are paying the VAT over to HMRC so it sounds as if they are actually seeing themselves as the "operator" and declaring the total income received as being theirs and payments to you as an expense. In this case, they are probably correct in charging VAT.

If the roles were reversed and you became the operator so you took the money and declared it on your tax return and treated the payment to them as the expense, you would collect £10,000, they would invoice you £5,000 including VAT (£4,167) for services rendered. They would be £1,167 better off and you would be £1,000 better off.

If anyone is employed (for say £1,000) you employ them which reduces the overall profit to £9,000 so they invoice you a total of £4,500 including VAT (£3,750).