This article covers:
Gross & Net Amounts
- Gross Amount: an item's price including VAT (the price displayed on products in all high street shops in the UK includes VAT)
- Net Amount: the price excluding VAT
The relationship between gross and net amounts is demonstrated in the example below:
Net (Gross/1.2) £100.00
20% VAT (Gross*0.2/1.2) £20.00
You Pay (Gross) £120.00
Different rates of VAT apply to different products – you should always ask for a receipt showing clearly the VAT rates and amounts charged if the supplier is VAT registered.
Brief explanation on VAT implication
The fundamental principle with VAT is that if you pay VAT on your income, then you can reclaim VAT on any associated expenditure.
As sport spectating is not exempt from VAT you will have been charged VAT on the original purchase of the tickets, which is then reclaimed. This is therefore a saving which is balanced out with the VAT paid on the onward sale. So if for argument’s sake the tickets were £120 and you sold them on at the same price:
|Purchase||- £100||-£20 reclaimed|
The only exception to this would be if we were not able to reclaim VAT on the original purchase because the supplier is not VAT registered, is exempt from VAT for other reasons or did not provide the correct documentation.
VAT on Tours
To explain what the tours VAT coding actually means. We have been advised that for trips and tours we should be using the Tour Operators Margin Scheme, rather than automatically assuming it is exempt. Under this scheme, there is no VAT to pay on tours that do not make a profit or make a loss, but there is VAT to be paid on any profit. This means that if a club tour makes a profit, we have to deduct VAT on the profit and pay it to HMRC. Unfortunately, we have no way of knowing in advance what trips will make a profit and which won’t, so for now, we are grouping all the Tours income and expenditure under the PT and ST codes and at the end of the year we will review which trips need to have VAT paid on them and which don’t. This means that throughout the year trips and tours will be treated as if they were exempt (PE or SE). This overrides any exemptions for sports clubs, so a sports’ club trip will be treated as a Tour, even if the main purpose is a core activity.