Welcome to Business Bitesize, Wright Vigar’s bi-monthly newsletter providing food for thought on general business matters.
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Q1: My mother died last year and left my brother and me a commercial business unit. Probate is nearly complete now. If we sell the property in the future, what are the capital gains tax implications on the sale?
Q2: I have recently registered for VAT. I am not very good when it comes to administration and I have heard that the flat rate scheme might help me. How does the scheme work?
Q3: I have a part time job and I earn about £8,000 a year. As my earnings are less than the tax-free personal allowance, can I transfer the unused amount to my husband?
A recent VAT Tribunal decision means those providing licensed wedding venues should check their VAT position.
The recent ruling is that the hire of the room should be subject to VAT at the standard rate, currently 20%. It is argued that the wedding licence affords the general public access to a wedding ceremony and therefore the wedding couple do not have “exclusive” use of the room. In order to exempt the supply the licence must “exclude others from enjoying the right”.
In the case of Bluechip Hotels Ltd they hired out a room in which the civil ceremonies were carried out. The room was set out with chairs for guests and a desk for the registrar. All arrangements and payment with the registrar are made by the couple. The room where the civil ceremony takes place is physically separate from any other wedding activities as required by the “Marriages (Approved Premises) Regulations 1995.
Bluechip put forward 2 arguments to support their claim that the supply of the room was exempt. Firstly that the land was an exempt supply in line with Schedule 9 Group 1 of the VAT Act 1994, and that it was a separate supply to the rest of the package. Secondly that if the first argument didn’t stand then the hire of the room was the principal element of a composite supply and all other supplies making up the package are ancillary to this exempt supply.
HMRC’s argument was that the supply of a “wedding package” was a standard rated supply comprising of multiple elements and that there was no main element. Alternatively they suggested that if the composite supply had a principal element it was the supply of a wedding reception and therefore the whole package would be standard rated.
The Tribunal looked at the 4 different packages that Bluechip offered its customers. It was agreed that the first option offering for the ceremony to be held in the licensed room and all other parts of the celebration to be held elsewhere qualified as an exempt supply.
The tribunal determined that the supply of a licensed room was not an exempt supply of land when provided as a part of a wedding package which included a wedding ceremony whether or not the price paid for the hire included catering and other related services. The nature of the supply is determined not by the actual supply but the reason why the supply occurred. They further stated that the provision of premises in which a civil wedding can legally be carried out is beyond the “passive letting of land” and therefore is outside the scope of the exemption set out in Schedule 9 Group 1 of the VAT Act 1994.
If you are a business offering licensed wedding facilities there is a risk HMRC will contact you to review how you account for VAT. If you would like us to consider your VAT position please contact Michelle Allen, Associate Director and VAT Guru, by emailing her at email@example.com or call her on 01522 531341 – she would be delighted to guide you through this legislative minefield.