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Should VAT be charged on online tutorials?
My client sells video tutorials for playing the guitar through his website.
The tutorials are sold internationally and the client trades through a limited company.
I am uncertain as to whether VAT should be charged. Is the business covered by the exemption for private tuition?
If VAT should be charged is it just on sales to UK customers?
Query 20,207 – Rock Star.
Providing a limited company with tax-efficient funds.
My client is the majority shareholder and director of a personal service company and his wife is also a director with a minority shareholding. I do not believe there are IR35 issues.
Over the years, most of the profits were withdrawn as remuneration or dividends and in recent years any capital reserves have also been taken as dividends because the business was winding down and they wanted to extract funds.
However, a new business opportunity has now arisen which they intend to undertake through the same company to mitigate any potential trading risks. To put the wheels in motion, the company will require an injection of capital to fund the new venture.
Can Taxation readers offer any suggestions as to the best way of going about this? Would it be better for the couple simply to lend money to the company or should they issue new shares in return for the capital?
Would there be any advantages in, say, one of them adopting one route while the other takes a different approach?
Assuming they remain in reasonable health, and if the business is successful, the clients think they would probably continue to trade for about another ten years before retiring. If they can find a purchaser, they would ideally like to sell the company or its business and assets at that time.
Advice on the tax-efficient injection of money to the company and any potential implications would be very welcome.
Query 20,208 – Adviser.
Is relief available for company put through liquidation?
My neighbour has asked a question about capital gains tax, which is not something I routinely deal with.
After retiring from employment, he carried on a consultancy business through a personal company owned with his wife.
He has now put it into a formal liquidation, which he believes will secure capital gains tax treatment (with business asset disposal relief – BADR) for the undistributed reserves; a simple dissolution would lead to income tax charges as the amount is over £25,000.
My first concern is to check whether this is correct, as it seems ‘too easy’. The difference between capital gains tax at 10% and higher rate dividend tax at 33.75% will clearly cover the liquidator’s fees.
His question is then whether he would be permitted to do similar work on a pro bono basis, or for fees paid directly to a charity of his choosing.
He is aware that carrying on a similar business commercially would negate his claim to business asset disposal relief and double the capital gains tax on the liquidation.
Any tips or traps that readers can point out would be helpful.
Query 20,209 – Neighbourly.
Is zero rating still correct on charity subscription?
One of my clients is a registered charity and charges a subscription of £35 per month to its members.
The charitable activity is to organise and promote ‘park runs’ for the over 50s across the midlands. The subscription is the charity’s only source of income.
The charity is VAT registered on a voluntary basis and has always treated £25 per month of the subscription as exempt from VAT and £10 as zero rated.
The zero rating relates to a monthly newsletter issued to all members and means that the charity can reclaim some input tax on its overheads.
My concern is two-fold:
- The £10 proportion was historically based on the cost of producing the newsletter – including postage – plus a 50% mark-up agreed with the local VAT office many years ago.
- The newsletter is no longer printed and posted but is available for members to view online only. Is an online newsletter still zero-rated?
- If the answer to the previous question is ‘yes’ – is £10 zero rating still correct when there are no longer any printing, paper or postage costs, ie a cost-based apportionment in accordance with VAT Notice 48, para 3.35 might not be correct?
I would be grateful for the views of Taxation readers.
Query 20,210 – Jogger.
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