General 81: VAT Update

The VAT Team are aware that a number of schools use different online systems to enable parents to make payments to the school. Please note that there are VAT compliance matters to observe and that all schools are required to follow them. The VAT Team would like to remind schools of this matter with the main issues highlighted below:

VAT on income

VAT must be accounted for on taxable income in the same month as it is received. It is the school’s responsibility to advise the VAT team of taxable income collected through any online system, to ensure that the VAT can be paid to HMRC on behalf of the school within this timescale.

Taxable sales would include staff and visitor meals, sale of adult size clothing, sale of any item which is not regularly used in class for curricular activities etc. – if you are ever unsure, please contact Sarah in the VAT team for advice.

Where there is the facility in the administrator screen to set VAT markers against ledger codes please ensure that these are applied.

VAT on transaction fees

If your provider transfers the income through to the school ‘gross’ and sends you a creditor invoice for the transaction fees then you can process the payment for the transaction fees through the creditor system in the usual way.

A few online providers offset their charges before passing just the ‘net’ income to the school – this makes it difficult for the schools to reconcile their income but also means that there is no way for the school to directly receive repayment of the VAT paid on these transaction fees. To receive credit for the VAT paid on these fees the school needs to request a manual VAT journal from the VAT team – the school must receive a VAT invoice from the provider and then request a reclaim of the VAT from the VAT team within the same month as the tax point identified on the invoice.

Prepayments

Prepayments are complex when identifying the correct point at which VAT must be accounted for. To simplify one area, where staff meals are prepaid, it will be assumed that all prepaid staff meals are vatable and VAT on the whole prepayment of the meal income will be taxed at the point the prepayment is made.

Contact:

Sarah (VAT): 01392 382842   vat@devon.gov.uk

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