Jason Croke

If the turnover in any 12 month rolling period does NOT exceed £85k threshold, then where you register for VAT, this is a voluntary registration and HMRC will generally reject a request to backdate the registration to an earlier date as the client will have chosen the voluntary date to register from and if client got it wrong, HMC has limited powers to correct that. However, if your client has exceeded the £85k threshold in any 12 month period, then that is a compulsory registration and the effective date of registration is the usual rules of ...the month threshold exceeded and then 30 days to notify....so if turnover breached in say October 2022, then registration would be from 01 December 2022. Obviously not party to all the detail, but it would seem HMRC are wrong to refuse the backdating of the registration - unless it was a voluntary registration, which you have indicated is not the case, and so it appears HMRC are wrong to refuse your backdating....the date of registration is a matter of fact and if as per my example threshold breached October 2022 then the EDR must therefore be 01st December and HMRC can't refuse that if that is what the numbers are saying....so maybe it was not made clear this was a backdating of a compulsory registration? Either way, seems odd without necessarily pointing fingers at HMRC as there may be some nuance here, either way, speaking to the VAT registration team or hopefully, HMRC will respond here with contact details for the Variations Team who are probably best placed to deal with this query.

Agent or Principal is a key platform of VAT. The other key platform to understand is ownership of the goods. When you sell art directly, you are the principal, that is, you own the goods and you are selling those goods to a customer. When you sell via an exhibition, you have to establish who owns the goods that are being sold. Option 1 is you sell the goods to exhibition and then they sell the art to customer (so exhibition own your art and they take the risk if they can't find a buyer and it is rare to see this kind of set-up). Option 2 is where the exhibition are merely an agent in facilitating the sale between you and the customer. The goods are always yours, the exhibition set a price but it's still your ownership. When customer buys art, the sale is between you and customer although the exhibition will facilitate that and so the exhibition may raise the paperwork and handle the paperwork. HMRC will not know the contract you hold with the exhibition so HMRC are not going to be able to help give an explicit answer, neither can I, without sight of the agreement you hold with the exhibition or giving more details as to who is doing what - and each exhibition/organiser may have different terms, but trust the above explains the basics. So, in your original question, if the exhibition are taking a commission, it suggests they are agents, so the sale of art is between you and the customer. Exhibition charges a percentage fee and if the exhibition is VAT registered, their commission will be plus VAT (which you can reclaim) and if the exhibition is not VAT registered, then their commission will be without VAT. In other words, there are two transactions going on here. Transaction one is you selling art to customer, so you charge VAT to customer (assuming this is a UK to consumer sale). There is then a second transaction between you and exhibition, whereby they charge you for organising everything. The selling price is the selling price, that is what you charge VAT on, you do not calculate VAT on the money you receive after commission. Again, two separate transactions...you sell art for £100 + £20 VAT (£120 total), exhibition takes a commission of say £60, you receive £60 into your bank. The value of your sale is not £60, it is £120. So you declare output tax of £20, not £10. You have £120 sales minus £60 cost of making that sale/commission....all of this assumes you are the principal selling at all times and the exhibition is acting as your agent, again, it depends entirely on the contract you have and this example here may or may not reflect your actual situation but is used here to explain how there are two transactions going on at the same time.

 

https://www.gov.uk/guidance/sport-supplies-that-are-vat-exempt-notice-70145#an-overview-of-the-exemption-for-sporting-and-physical-education-services Section 2.1 states exemption only applies to an "eligible body", Section 3.1 states the 4 conditions that must be met and condition 4 requires the business to be an "eligible body". Section 4.1 defines what an eligible body is. A limited company is unlikely to be an eligible body...however, a limited by guarantee entity can meet the conditions of being an eligible body so long as the constitution prohibits distribution of profit to the shareholders. Richard, in your post you state your client is a "limited company", on face value that isn't an eligible body and therefore exemption doesn't apply unless the Articles of Association are specific as to what happens with profit. You must be certain that conditions at 4.1 are met for exemption to apply.

Depends on what the contract said (ie, did the suppliers contract states that the price was VAT inclusive or exclusive?) The customer is not obliged to pay the VAT only invoice (subject to the answer for point 1), it is more a matter of contract law than VAT, in effect, the supplier is changing the price they originally quoted. The customer can reclaim VAT on this backdated VAT only invoice, subject to the usual VAT rules, that is, purchase was for the business and the business can reclaim it's VAT (ie, if it's for a hot tub for a Directors home then its not a business purpose...and if the business is partially exempt - like a charity for example - then it may not be able to reclaim all of this VAT), but if the customer is a taxable business that can reclaim it's VAT then the VAT is recoverable. If the customer can reclaim VAT then might as well allow supplier to issue VAT invoice, customer can reclaim it so no overall loss to anyone, if the customer cannot reclaim their VAT because they are not VAT registered or partially exempt, then might require a conversation with the supplier as the contract may or may not allow them to issue VAT invoices at a later date.

Useful guidance here https://www.gov.uk/hmrc-internal-manuals/vat-registration-manual/vatreg10000 as you have to first decide if you are e genuine JV which HMRC see as a partnership and would mean Companies 1 and 2 register for VAT as an informal partnership/JV. Place of supply is where your customer is, based on what you've posted, Company 1 is making a supply in Angola and outside scope of VAT as you have stated. Look at the contractual reality....is the Angolan customer really signing two contracts - one with Company 1 and one with Company 2? From what you describe, only Company 1 is invoicing the end customer, that suggests Company 1 has the "contract " to do business with Angola and Company 1 is sub-contracting some of the work to Company 2 so in that scenario Company 2 isn't making a contractual supply to Angola, but to Company 1. If the contract states both companies are contracted to the end customer, then why is Company 2 invoicing Company 1? You need to be clear in your mind as to what is going on here contractually - that is look at who is supply what to Angola, either both companies are contractually required to supply X and Y or there is one contract with one company....once you figure that out, then the answer will reveal itself. Sidenote, Angola operates a withholding tax depending upon what sort of services are being supplied, so just make sure both companies are aware of any other tax implications.

Short answer is no, the VAT refund belongs to the company, not the Director. The Director is not the company. If the business is still VAT registered, why has the bank account been closed? If the company is VAT deregistered, then you will need to speak to HMRC to explain the situation.