Schools to charge VAT on rent to School Holiday Camps

Value Added Tax or more commonly known as VAT is something that everybody will have heard of and most likely encounter on a daily basis.

But most will now know that it is probably one of the most complicated taxes in the UK Taxation system.

It may not seem this way but the vast legislation and complex rules on what rate of VAT to use for what type of good or service will often lead to lengthy discussion among tax advisers.

Many large corporations (such as McVities and M&S) have also been embroiled in hugely famous VAT cases with HMRC.

Here we will briefly look at one area which many parents may become exposed to, their children’s summer camp

The problem

Sports camps that rent space from schools during the holiday times were claiming that they were exempt for VAT, since they were providing childcare. 

In 2016 HMRC successfully argued, at tribunal against Sports Academies Ltd that they were in fact providing activities (in addition to) as opposed to solely childcare and as such the service should be standard rated for UK VAT.

The childcare element was deemed to be a by-product of the sports activities provided.This meant that rather than no VAT charge being made, the school would need to charge 20% VAT.

For Schools

This means that in light of the HMRC and tribunal ruling regarding Sports Academies Limited, most schools who rent out their space and facilities in the school holidays to these ‘summer camps’ should be considering charging VAT to Sport Camp providers for the provision of space, facilities and the use of their facilities.

For Sports Camps providers

In light of the changing stance by HMRC, all sport camp providers should re-consider their VAT position as to correctly account for VAT on the services that they are providing.

Should they continue to operate as an exempt business, it could be sooner rather than later that HMRC enquire into their business and seek to reclaim the VAT that was incorrectly charged.

Although they will need to charge VAT on their supplies, as a VAT registered business, they will be able to recover the input VAT charged by the school.

Ultimately this makes the provision of sports camps more expensive for the end customer.

What are the options?

For providers who can clearly demonstrate that they provide childcare there should no problem with arguing that this is an exempt supply. 

Given that most providers fall somewhere between providing childcare and activities, it is strongly recommended that you seek professional advice before making any assumptions on your company’s VAT status.

Wisteria act for many organisations in the education and charity sectors. If you have any questions or queries about accounting or tax within the education sector please call us on 020 8429 9245 or email us at [email protected].