Employer contribution and VAT

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This topic contains 2 replies, has 3 voices, and was last updated by  Chris_The_ATP 1 month, 2 weeks ago.

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  • davej
    Participant

    A question from our finance team. Is the employer contribution towards current trailblazers subject to VAT?

    Gut feeling is that it is a contribution towards government funded training, so wouldn’t be, but unable to find any clarification in the guidance, so would appreciate any info you may have.

     
    #143597

    sambern
    Participant

    We’re not offering any trailblazers, but as I understand it any money that isn’t directly received from the government is subject to VAT. So all employer contributions are subject. The guidance doesn’t offer much advice other then to approach an accountant for final advice. Although finding an accountant that is aware of the legal implications of government funding is tricky!

     
    #143617

    Chris_The_ATP
    Participant

    Any employer co-investment or funds received above the funding band maximum is subject to VAT at 20%. Keep in mind that you can’t reclaim any input VAT on costs that are attributable to the exempt turnover (i.e. gov funding). Worth noting that there is a de minimis rule for VAT which does allow exempt input vat to be reclaimed. The two tests are:
    – Test one: total input tax incurred is no more than £625 per month on average and the value of exempt supplies is no more than 50 per cent of the value of all supplies
    – Test two: total input tax incurred less input tax directly attributable to taxable supplies is no more than £625 per month on average and the value of exempt supplies is no more than 50
    per cent of the value of all supplies.

    More info on https://www.gov.uk/government/publications/vat-notice-706-partial-exemption/vat-notice-706-partial-exemption.

     
    #148992
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