"SavetheUKCC" petition

[Mike Truran]

4NCL come in well beneath the limit

...... although our turnover is now £60k+ (split broadly equally between entry fee income and commission income), so it's something we're going to have to keep an eye on in the future, even though it's not an imminent problem. Something like the "London solution" may be appropriate in due course.

[Neil Graham]

We all hope that chess should have VAT exception, but it doesn't and that is doesn't really doesn't make it an excuse not to pay VAT, personally it looking to me that Mike is trying his best to wriggle out of a corner of his own making and I have no sympathy to him; also over 20 years no profit has been made out of this organisation, I doubt that

The BCF spent a great deal of time trying to be recognised as a sport and/or not paying VAT based on this. Whilst the ECF has, no doubt, also pursued this policy it is a dead duck. During this period all the arguments contained in Mr.Basman's Delancey statement were put forward. Indeed an Early Day Motion was tabled by Charlotte Atkins, the MP for Staffordshire Moorlands, whose daughter Emma was a strong junior player on this very subject. I can remember talking to Adrian Sanders, the Liberal Democrat MP for Torquay, at the British Championships there and he signed the motion and encouraged other members of his party to do so. It came to nothing just as writing to MPs now will achieve exactly the same result. If the UKCC is to continue it will not be saved by a petition.

[Nick Grey]

I suspect there is NIL chance of getting VAT through the schools. Not least because of non-issue of a valid VAT invoice.
As much of the arguments are on educational benefit that is irrelevant to the current law.
Very little sympathy he ought to have taken advice.

[Roger de Coverly]

I suspect there is NIL chance of getting VAT through the schools. Not least because of non-issue of a valid VAT invoice.

Admittedly there would be a pile of paperwork, but I don't think schools need to be charged an extra 20%. Making the assumption that the prizes and awards cost £ 30 to supply, I think the skeleton calculation would look something like this.

Entry fee before VAT £ 35
VAT on entry fee £ 7

Total £ 42

Cost of prizes before VAT £ 25
Cost of VAT on prizes £ 5

Total £ 30

Thus net gain £ 12 of which net VAT payable (£ 7 - £ 5) is £ 2.

Schools might be able to reclaim £ 7

HMRC has collected £ 5 from the supplier of prizes and £ 2 from UKCC and has to hand £ 7 back to the school. Crazy I know, but that's VAT rules for you.

[Michael Flatt]

I don't understand Mike's argument about schools being able to reclaim VAT since most primary school chess clubs (breakfast, lunchtime & after school) in our area seem to be run commercially by independent suppliers.

In our Junior County Association the organisers and helpers are unpaid volunteers. Any surplus from running the Megafinal goes to the Association to support its work in promoting junior chess in the county.

The first round of the UKCC normally runs during the Spring term with information packs being sent to school clubs and other junior clubs some time before Christmas. So, there are still a few more months before UKCC has to decide whether the competition will continue and whether it will follow the same format.

I'm assuming that the (Delancey) UKCC it will carry on, although entry fees may rise.

Edit: The mention of the Megafinal organiser having to pay VAT on venue hire was incorrect and has been deleted.

[Mick Norris]

since we don't have sufficient turnover to be VAT registered we can't claim it back

I assume you can still choose to be VAT registered, you are only forced to if your turnover goes above the limit

[Michael Flatt]

since we don't have sufficient turnover to be VAT registered we can't claim it back

I assume you can still choose to be VAT registered, you are only forced to if your turnover goes above the limit

You miss my point.

If the organisers of the Megafinals collected the entry fees themselves (rather than centrally by UKCC), we wouldn't need to charge VAT on entry fees.

Edit: The mention of the Megafinal organiser having to pay VAT on venue hire was incorrect and has been deleted.

[harrylamb]

since we don't have sufficient turnover to be VAT registered we can't claim it back

VAT on room hire is complicated. In principle It is VAT exempt. But it is easy to make it VAT liable by offering a service. If catering is offered in the room (For example at a wedding) the total bill may then be vatable.

As an example of the workings of VAT. For the Manchester Summer congress, my itemised bill lists ”Room hire” charged at 0% VAT. This is for the playing hall. Separately I offer student style accommodation to competitors. Because it is accommodation which is a separate category than room hire I am charged VAT at 20% on this item.

It may be worthwhile reading up on this (there are a lot of good articles available by googling). Then asking your landlord why he is charging you VAT.

[Michael Flatt]

VAT on room hire is complicated. In principle It is VAT exempt. But it is easy to make it VAT liable by offering a service. If catering is offered in the room (For example at a wedding) the total bill may then be vatable.

Thanks for that. I just checked our Invoice for hiring the venue for the last Megafinal and as you suggest it is zero rated.

[John McKenna]

For the naked rambler in VAT land rescue was at hand (if he had sought it early) -

http://www.companyrescue.co.uk/hmrc-and ... ye-arrears

[Alex Gillies]

I don't understand Mike's argument about schools being able to reclaim VAT since most primary school chess clubs (breakfast, lunchtime & after school) in our area seem to be run commercially by independent suppliers.

A lot of the facts are not known and clearly detailed advice should have been sought but based on what I have read there did seem to be other options. The devil is always in the detail.

Schools should be able to recover the VAT using form 126 even if they are not already registered for VAT
http://www.sec-ed.co.uk/best-practice/d ... stand-vat/

It follows from that that the UKCC has an advantage vs standard congresses as its "customers" can simply recover the vat charged. Perhaps even retrospectively for say 4 years. Although that seems very impractical now, as its low value and high volume and would not be well received.

Mike's rationale may have some moral merit but it seems financially naïve, especially if it was run for a commercial profit. Seems to be that there were several options available:
1 (Genuinely) Split it up between regions to stay below the vat limit - if it was genuinely done it would affect some profitability/control/ownership
2 Run it as a charity/not for profit - a reasonable fee could still be charged to cover labour time. (Assumed that charitable status could be granted)
3 Register for vat and profit from the input vat on all costs. This would have been quite considerable financial gain.
4 VAT Flat rate. A potentially less profitable set up that 3 but still quite profitable. https://www.gov.uk/vat-flat-rate-scheme/overview For this to work the annual sales need to be £150k initially followed by max of £230k, note pre vat levels. You have to pick the correct rate which seems to be 12% or more likely 8.5%(recreation and sport) As these rates are on gross income the relevant rate is actually 9.8% (8.5 x1.2) with 10.2% potential easy profit. With 12% its 14.4% so it could still generate 5.6% profit. This assumes 100% claim back by the schools. Also 1% discount applies first year and vat can be claimed on capital expenses and some pre trading- which could also have been significant. To keep below the 150k and 230k limit entries could be capped or again genuinely and commercially split for regional or preliminary qualifiers outwith the main tournament.

The point about option 3 is it would have funded the financial and admin cost of doing it. Probably the best financially but it depends on vat on costs especially printing and venue costs as they are not always vatable.
As Mike felt so strongly that he wanted it kept simple then he probably could have gone for option 4. He would simply return 8.5% of gross sales and mop up other profits if and when he had the time or inclination.

Ironically if the petition succeeds( for the overall better of individual chess players with lower entry fees) it could be future organisers of the UKCC that they may well be complaining that the can't register for vat.

[Roger de Coverly]

It follows from that that the UKCC has an advantage vs standard congresses as its "customers" can simply recover the vat charged.

It doesn't follow though. The first point is that with the exception of the ECF itself, all other Congress organisers are well below the VAT threshold. The second point is that a lot of the entry fee income comes from £ 15 per head at the Mega, Giga and Strat finals. These are individual entries presumably paid for by the entrants themselves, or more likely their parents. Running the Mega finals as a centralised event is what incurs the VAT and as local organisers have suggested earlier they could make the need to charge `VAT go away by taking on the financial responsibilities themselves for entries and prizes.

[Nick Grey]

From my experience HMRC ought to be going after the Deliberate and concealed part of the penalty regime.

Schools cannot retrospectively be charged the VAT & can only put VAT through a LAs HMRC claim on provision of a valid tax invoice.
Some set ups may even have charges to parents & in those cases cannot put their VAT liability through its books either, nor PTAs invoices.

DfE have got their knuckles wrapped so many times for not putting proposals via Treasury first - regarding VAT & other non compliant finance matters.

I think it is a rather sad version of what we saw in the past as some rather commercial practices in chess for juniors. At the moment I have far better recollection of these issues within my association 20+ years ago than the last year or so.

Personally I think too much charging of parents for a whole lot of items including representing their country & those that deal with that may want to look at Olympic funding & specific targeting.

[Alex Gillies]

It follows from that that the UKCC has an advantage vs standard congresses as its "customers" can simply recover the vat charged.

It doesn't follow though. The first point is that with the exception of the ECF itself, all other Congress organisers are well above the VAT threshold. The second point is that a lot of the entry fee income comes from £ 15 per head at the Mega, Giga and Strat finals. These are individual entries presumably paid for by the entrants themselves, or more likely their parents. Running the Mega finals as a centralised event is what incurs the VAT and as local organisers have suggested earlier they could make the need to charge `VAT go away by taking on the financial responsibilities themselves for entries and prizes.

I am refereeing to UKCC in particular not other events although some events could also benefit with flat rate or restructuring. Not the same way as the UKCC as schools can claim vat back.

Its a schools event and it could be structured that entries come via schools 100% or closer to it.

[Roger de Coverly]

Its a schools event and it could be structured that entries come via schools 100% or closer to it.

It isn't really though, is it? There's only a tenuous connection with schools from the county level finals onwards and are not entry fees for these collected from individuals taking part?

I would have thought the bottom line with VAT is that all entry fees would have to be increased by 20% or some lesser amount to the extent there are offsets available.