Millennium entry fee up xx%

[Russell Smith]

The teams are effectively Retail clients. There is no Vat charged on retail sales, vat is included in the sale, but it is not 'added'.
but at the end of the day no-one likes a price-rise and thats what it is...

You are right in that in the UK especially we hide all the taxes retail customer pay by selling at an all inclusive price, but those taxes are still charged. I believe those very taxes have been paid all along by the Millennium series and to separate the VAT element from the entry fee and imply they have never paid vat on entry fees is a very easy way to increase the entry fee and blame the vultures at the tax office for it.
It will all come out in the wash, and I may like a few others look stupid, and in this case I hope I do, but I doubt it.


Russ

 

[MissyQ]

Thats my point Russ. The teams/customers, who pay 'retail', have always paid the vat, because they pay retail, and vat is not added to retail sales in the UK. VAT can't be added to retail. retail prices just go up, and still include the vat, which is in effect what is happening here.
You may or may not be right about the league paying taxes, but it is better to know for sure before you throw such serious accusations around. I am sure the teams would thank you for investigating though.

In the US tax is added onto retail, and thats what they are used to, but if its a UK company, paying UK vat, it seems very odd that they would be charging it to the end user (retail) as this is not the normal way of things. Plus, if the end user claimed the vat back, no-one would have paid the vat. This is not how the government operates. Someone has to pay it in the end, and then not claim it back, and this is typically the end user, or retail customer, which in this case is the team playing the event.

 

[Russell Smith]

Missy,

When the company you work for buys in a product (lets say a line of clothing ) they pay the vat on the price they pay and then offset that against vat due at the end of quarter accounts.
Now lets say you give some free to the teams you like (you could send the PA some next time) it matters not to the tax man, he will just want the difference between total retail sales minus total trade purchases.
So if a company pays for a team (even if you look at them as a retail customer) they can claim the vat back.
I am getting a headache now, guess I will pay my accountant a bit quicker this year, looks like she deserves it.

Russ.

 

[Chicago]

So if a company pays for a team (even if you look at them as a retail customer) they can claim the vat back.

But if a TEAM pays a COMPANY that pays for the entry fee, then that company MUST charge the team VAT as well.

So, let's say Millenium wants $1,000 per entry fee, after taxes. So they charge teams $1160 or whatever, including VAT. Team pays $1160, Millenium pays the government $160 and keeps $1,000.

It has been proposed that to get around the VAT, a team would just give some other company $1,000, then the company would pay $1160 to Millenium, and claim the extra $160 on their VAT.

The reason this doesn't work is that this middle company still has to pay VAT on the money they got from the team. So if they collect $1,000 from the team for the entry fee, then the company must to pay $138 in VAT on that $1,000.

So what has happened here? The company gets to deduct the $160 VAT they paid to Millenium. But they must pay and ADDITIONAL $138 VAT on the $1,000 they got from the team.

So, $1160 to Millenium - $160 VAT credit - $1000 received from team + $138 VAT = $138. Meaning the company, assuming they're not going to evade taxes, loses $138 on the deal.


So how do you do this so the company doesn't lose money? You'd have to pay them the $1160 so that once they pay the VAT on it, they'd still have $1000 left over to pay Millenium. So you might as well just pay Millenium in the first place.

 

[Fisz]

Simple.

The company takes 1000 Euros/USD/Pounds or whatever currency you want to deal in, sends a payment of 1175 E/U/P to the Millennium, gets an invoice for that amount and deducts the VAT paid from the VAT owed to the government based on sales of products or services. Additionally, the 1000 E/U/P can be qualified as a cost (advertising) which also lowers their tax. They don't loose anything by paying the VAT to the Millennium, they just don't pay it to the government at the end of the month.

Question is, when you pay to the Millennium, are you paying for a product or a service? If it's service, I think that it matters where it's taking place as it may fall under export, in which case VAT should not be charged.
Taxes are complicated, but sometimes a lot of fun

 

[Luke W]

Simple.
Taxes are complicated, but sometimes a lot of fun

You need to get out more

 

[Chicago]

Simple.

The company takes 1000 Euros/USD/Pounds or whatever currency you want to deal in, sends a payment of 1175 E/U/P to the Millennium, gets an invoice for that amount and deducts the VAT paid from the VAT owed to the government based on sales of products or services. Additionally, the 1000 E/U/P can be qualified as a cost (advertising) which also lowers their tax. They don't loose anything by paying the VAT to the Millennium, they just don't pay it to the government at the end of the month.

Question is, when you pay to the Millennium, are you paying for a product or a service? If it's service, I think that it matters where it's taking place as it may fall under export, in which case VAT should not be charged.
Taxes are complicated, but sometimes a lot of fun

You missed part of the equation. They can't just take 1000 Euros/USD/Pounds or whatever - they have to pay VAT on it. So yes, they can reduce their VAT bill by the VAT paid to Millenium, but their VAT bill *ALSO* goes UP because of the money received from the team.


To illustrate, let's say that instead of an entry fee, we were talking about a car. If I go to a retailer and buy a car, that price includes VAT, right? If the car is 1000 whatevers, that means there's about 160 whatevers in VAT and the car dealer actually gets 840 in revenue after paying the VAT.

Now, what happens when if I were to go to a third company and say 'Hey, I'll give you 840 whatevers if you go buy this car for 1000 whatevers and write off the VAT on your return.' They won't do it, because they MUST pay the VAT on the 840 whatevers they got from you.

In order for the company to come out even, they would have to charge you 1000 for the car, so that after they pay the VAT on the 1000 they got from you, they still have 840 left over to pay the car dealer. If this wasn't the case, EVERYBODY would just buy everything through a company.

So, yes, you can pay a company 1000 instead of 1175 and have them pay the entry fee for you and write off the vat and come out even - IF they don't mind going to jail for tax evasion for not paying the VAT on the 1000 they got from you.

 

[Buddha 3]

Chi,

I think what people are steering towards is some sort of shady deal, in other words the team pays their sponsor 1000, but this is not on the papers, below table, cloak and dagger stuff. In other words, it's a tax dodge.

Technically you are completely right. Which is why I'm saying that for many teams (laws do differ from country to country) it would be worthwhile investigating 'going official'.

As far as dodging VAT goes in connection with that import/export theory, that only applies to business taking place outside the EU. So I guess you lot better start hoping for that once rumoured Moscow MS event.

 

[jotajotaZ]

gah - I managed to delete my post

Chi: you're only partially right. There's a way to be billed without VAT (intracomunitarian resellers or whatever is it called in English). A company could then resell the entry fee to a team at a discount for promotional reasons. This approach makes it a necessity that the team is a taxable entity, be it a sports club, association or whatever.

 

[Beaker]

.....They won't do it, because they MUST pay the VAT on the 840 whatevers they got from you....

That's not true mate.

Using your figures:

Car - 1000
Actual price 840
VAT - 160


You want it for 840, not the full 1000 so you go to a car dealer friend and ask him to buy it for you.

He pays 1000

He has then paid 160 in VAT, he's in credit to the government for that...

On his next VAT return he's sold other cars for a total of 5000, so his liability is 5x160 - 800. He then claims back the 160 he's paid for your car, reducing that liability to 640.

You pay him 840, on his books he has to show that as some form of income (which he simply offsets against his "cost" of the 840 for buying your car), it's nothing to do with VAT.

Accounting wise, the only thing that puts him at a disadvantage is he's paid out that extra 160 for you, and it might be several months before he gets that "back" as part of a reduced VAT liability.

A true VAT scam would be for you to be incorporated as well, and you list that 840 you pay as actually including VAT, then claim it back against your own return down the line, reducing the total cost to you to around 600, with the government picking up the tab in a false VAT claim...