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HMRC have published a brief relating to the VAT treatment of school holiday clubs. This update comes as a result of a case heard by the First-Tier Tribunal in relation to RSR Sports Limited and will be of significance to any business making supplies of this nature, particularly those who may have treated these supplies incorrectly and as a result could be liable to recover output VAT that has been incorrectly overpaid.

The Appellant in this instance, RSR, argued that the services they provided, namely being the operating of children’s holiday camps, constituted a supply of welfare services which are exempt from VAT under Item 9 of Group 7 of Schedule 9 of Value Added Tax Act 1994. HMRC had disagreed with this argument and so the case went to the First-Tier Tribunal who considered whether the main element of the supply was childcare (exempt from VAT), or activities run by the staff for the benefit of the children (VATable at 20%). On balance, and subject to other conditions, the FTT determined that the main supply was that of childcare and services supplied were therefore exempt from VAT.

As a result of this ruling, any output VAT accounted for by RSR was declared incorrectly and as such they were able to reclaim this amount from HMRC. This ruling is beneficial to the business as their customers are non-business persons meaning that any VAT chargeable on their supplies is an irrecoverable cost and, in effect, increases their prices by the percentage of VAT charged.

If you or your client are making supplies of the nature described above, it is crucial to clarify the appropriate VAT treatment to avoid incorrectly account for VAT. Furthermore, if you believe your supplies may qualify for exemption and VAT has been overclaimed and this VAT may be recoverable from HMRC, please call our free VAT helpline today.

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