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A property management company paid a franchise fee that enables it to manage property insurance claims within a specified postcode area. VAT was paid on the fee, but the company uses the flat rate scheme
A VAT-registered company uses the flat rate scheme and provides property management services for large blocks of residential flats in London. As a side-shoot of the business the company purchased a franchise for a postcode area outside of the capital.
This allows the company to earn income from managing insurance claims on property-related matters where the claimant asks the franchisee to act as agents and manage the claim; for example obtaining repair estimates and then engaging the subcontractors etc to repair the premises.
In January 2012 the company paid £36 000 for the franchise including input tax of £6 000 which it did not claim back under the flat rate scheme. Is this totally a capital asset or do HMRC view it as having service and capital elements and therefore requiring apportionment?
Apart from a few days’ initial “training and induction” the services element...
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