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Does art club have any tax obligations?
One of my clients is an amateur artist. She is a member of a club of like-minded artists (as far as I can see the club doesn’t have any legal status and it is not a charity). The members pay a small monthly subscription which covers the costs of art materials used at their monthly meetings, where they discuss painting techniques and try out different styles. It also covers tea, coffee and biscuits. I am sure that this is a mutual concern and no tax arises.
The club is planning a summer exhibition. Individuals will be able to sell their paintings to the public but 5% of the proceeds will go to the club to cover running costs and perhaps the purchase of more art materials. It is possible that some members of the club will buy pictures from other members.
I don’t think that the club will be taxable on the sale of the paintings themselves, as the sale will be by the individual members. But what about the 5% which goes to the club? Is this taxable? If so would there be any distinction between the 5% received from sales to the public and the 5% received from sales from one member to another? I don’t think that the trading allowance is available to a club.
I suspect that we are only talking about sums in the low hundreds but the club is anxious to get everything right. What advice should I give my client?
Query 20,339 – Picasso.
Do employers meet benefit-in-kind criteria?
Smaller businesses that, in reality, are not going to set up their own nursery are able to club together with other employers to provide childcare for their employees’ children. This can be an exempt benefit in kind (EIM21920) for employees. The employer is wholly or partly responsible for financing and managing the provision of the care:
- Management requirement (EIM21930): employers must play a part in management. Arrangements in which the employer’s participation in management is little more than a token gesture, purporting to meet the statutory test but without real responsibility falling on the employer, will not meet the test.
- Financing requirement (EIM21925): the ‘responsibility for finance’ test for jointly run workplace nurseries requires significantly more than merely buying-in places from a commercial nursery whether on an ad hoc, or a more structured, basis. There must be some real and substantial commitment to funding the facility or providing it with capital.
My client has been in contact with a company which runs a scheme for small employers which purports to meet those criteria. I have contacted them to understand how. They point to a tribunal in 2010 giving some comfort, however I understand the rules to have been tightened since then.
In order to cover off the management and financing requirements, they ask for a fixed monthly stipend from the employer to the nursery of choice. They then meet the nursery to discuss how best to spend this. This, they say, meets the two requirements.
I am sceptical that that meets the criteria and I’m nervous about encouraging my clients to proceed with such a model. Am I being over cautious?
Query 20,340 – Unsure.
VAT on site clearance work?
I am confused about HMRC’s view that my client has provided VATable rather than zero-rated services for work carried out on the construction of new dwellings. Basically, my client provides a driver and digger to remove soil and other substances from a new build site. My view – and that of my client – is that the services are zero rated because they relate to the construction of new dwellings. However, an HMRC officer has explained that because the work of my client is controlled by the main contractor that he is invoicing – the contractor instructs him what to do each day – the supply is one of ‘staff’ and ‘plant hire’ rather than ‘construction services with equipment’.
It seems a strange approach by the officer, especially as the contractor can claim input tax anyway. If the supply is standard rated, will the reverse charge apply to the invoice anyway, which gets us back to the starting point of ... sales invoices issued by my client without charging VAT.
Query 20,341 – Digger.
Website subscriber fees: what about liability of VAT?
I have taken on a new client who sells membership subscriptions to other businesses, giving them the right to gain access to my client’s website, which then gives the subscriber links to other websites with hot news items and other features that they can use within their organisations.
My client will have a combination of UK and non-UK business customers. First, am I correct that my client is supplying an electronic service, so there will be no VAT issues for the sales to the non-UK customers? These customers will presumably account for the reverse charge on their own returns? Secondly, am I correct in saying that my client will only need to register for UK VAT if the annual value of the UK sales exceeds £90,000 in any rolling 12-month period?
Finally, what will happen if my client has some non-business subscribers, even though this appears to be unlikely?
Query 20,342 – Digital Dan.
Queries and replies
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