Primarily for general aviation discussion, but other aviation topics are also welcome.
#1740611
SpeedBrake wrote:
CloudHound wrote:And zero rate VAT on training too.


As I understand it, that would mean that Flying Schools wouldn't be able to claim back their VAT on Fuel, Maintenance, Rent, and other expenses. If they're not charging VAT, they don't get the perks of claiming it back.

Therefore VAT on all of that is just included (hidden) in the price. So the only VAT a PPL student would actually save would be that on the markup / profit (and most likely the cost of the instructor's time)?

Don't get me wrong it saves some money, but wouldn't be an overnight 20% saving on PPL training.


I'm a long way from a VAT expert, but I don't think that this has to be the case. You can Zero Rate or Exempt a specific type of sale, but still claim back VAT - it's different to not being VAT registered.

I'm not saying that's how any of that would happen - I wonder how something like the food industry works it where specific things are exempt.
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#1740616
SpeedBrake wrote:
CloudHound wrote:And zero rate VAT on training too.


As I understand it, that would mean that Flying Schools wouldn't be able to claim back their VAT on Fuel, Maintenance, Rent, and other expenses. If they're not charging VAT, they don't get the perks of claiming it back.


That's not correct... if they are VAT registered they can claim that back. they can't if they are not VAT registered.

For example, medicines are VAT rated at 20%, but prescriptions for human use are zero rated. Pharmacies purchase medicines with VAT and claim it back. When they seem those meds (on prescription) there is no VAT collected from the customer, so if they sell enough meds on prescription they get money back from HMRC.

Don't forget that VAT is a sales tax on consumers, not a tax on businesses. Businesses are merely used as a tax collector by HMRC
#1740624
PaulB wrote:For example, medicines are VAT rated at 20%, but prescriptions for human use are zero rated. Pharmacies purchase medicines with VAT and claim it back. When they seem those meds (on prescription) there is no VAT collected from the customer, so if they sell enough meds on prescription they get money back from HMRC.

:scratch: :scratch: :lol:

Maybe not the simplest example to explain the consumer tax. :wink:
#1740666
PaulB wrote:
SpeedBrake wrote:
CloudHound wrote:And zero rate VAT on training too.


As I understand it, that would mean that Flying Schools wouldn't be able to claim back their VAT on Fuel, Maintenance, Rent, and other expenses. If they're not charging VAT, they don't get the perks of claiming it back.


That's not correct... if they are VAT registered they can claim that back. they can't if they are not VAT registered.

For example, medicines are VAT rated at 20%, but prescriptions for human use are zero rated. Pharmacies purchase medicines with VAT and claim it back. When they seem those meds (on prescription) there is no VAT collected from the customer, so if they sell enough meds on prescription they get money back from HMRC.

Don't forget that VAT is a sales tax on consumers, not a tax on businesses. Businesses are merely used as a tax collector by HMRC


That is not quite correct either. If an activity is outside the scope of VAT then then VAT registered or not you might not be able to claim the input tax back.

The key here is whether training becomes zero rated and schools can claim back their input tax or it is moved outside the scope of VAT. In this case the input tax just becomes another cost and no saving to the student.

Even worse, some activities are within the scope of VAT either standard rate or zero rate and some exempt. This then becomes an admin nightmare allocating the input tax and claiming back the share attributable to the in scope activity.
#1740669
chrisbl wrote:That is not quite correct either. If an activity is outside the scope of VAT then then VAT registered or not you might not be able to claim the input tax back.

The key here is whether training becomes zero rated and schools can claim back their input tax or it is moved outside the scope of VAT. In this case the input tax just becomes another cost and no saving to the student.


Is flight training likely to be made exempt or out of scope? It doesn't seem to fit easily with the "out of scope" list here

HMRC wrote:Out of scope
Some goods and services are outside the VAT tax system so you can’t charge or reclaim the VAT on them. For example, out of scope items include:

- goods or services you buy and use outside of the EU
- statutory fees - like the London congestion charge
- goods you sell as part of a hobby - like stamps from a collection
- donations to a charity - if given without receiving anything in return


https://www.gov.uk/vat-businesses/when- ... charge-vat

I can see that zero rating might cause issues turning training institutions into repayment traders

(Not an expert)