VAT and education services

Hi,

I wonder if anyone can help answer a couple of questions for me regarding VAT and education services.

I've just left a full-time PAYE job as a lecturer to go back to college to do a masters in another college. My employer, a third-level private college that is state recognised, has agreed to keep me on part-time. This means I get paid just for the actual lecture hours I do. On the advice of other lecturers, I am going to set up as a sole trader initially and can invoice the college every month for the gross amount. My income would be a lot less than threshold for VAT registration.

As I understand it, college/university services are VAT exempt meaning I could not claim back VAT on taxable purchases. However, one of the lecturers (who has formed a limited company) does claim back tax (just a small amount) every couple of months. He only provides services to the same college. I would like to be able to claim back VAT as I need to buy a new computer, etc.

So here are the questions (eventually!): Can I claim back VAT on taxable purchases if I'm only providing education services?

If not, is there any point registering for VAT?

One more thing; I'm also hoping to also set up an online retail site (selling t-shirts which uses one of those print on demand sites like Cafe Press). I will set up a limited company for this, but won't be ready to trade until next year some time. Do you think it would be better to set up a limited company now and put the education services through this as well or stay as a sole trader? Will this have any effect on the VAT situation.

I know this is a quite involved post, but I thought the more information the better. Any small piece of help would be greatly appreciated. I'm just sending off my TR1 form this week so I'm really green about these things.

Thanks in advance.

I dont think you should register for vat, also i assume the college would only pay you a certain amount and would not be to inclined to pay the extra vat. As your reclaim is so small it could turn into admin nightmare, Just dont think it would be justified. Main them is to save money for income tax. In regard to company i would hold on till early 09 to see what the small print is in regard to new start up's as announced in budget. ( saying at moment new company start up in 09 exempt from corp tax for 3 years)

You are correct - training and education services are VAT exempt, so even if your invoices totalled more than the VAT threshold, you would not be charging VAT to your employers.

Training and educational supplies have VAT levied currently at 21% (21.5% in the new budget).

Unless will have substantial expenditure on educational supplies, I see no point in registering for VAT for this part of your work.

With regard to a computer, printer, scanner and software Apple, HP, Dell, Microsoft and others offer substantial discounts to students, teachers and educational establishments on hardware and software and availing of these discounts could save you more than the VAT reclaim on a retail purchase and reduce the admin effort of regular VAT returns.

Some of these purchases may also be allowable against personal tax for a sole trader.

Thanks for the information. I don't think I will register for VAT then if I cannot reclaim the VAT. My employer is not registered for VAT in any case.

One more thing, can I use my personal bank account as a sole trader? I do have a business account but it seems to be a lot of hassle with fees, transfering money etc. However, it might be better to have a business acoount to keep things separate.

bobtongs said:

One more thing, can I use my personal bank account as a sole trader? I do have a business account but it seems to be a lot of hassle with fees, transfering money etc. However, it might be better to have a business acoount to keep things separate.

Click to expand...

I think your last sentence answers the question posed in your first sentence.