The Association is a separate organization from the London Business School. It is run by the students. They however contract with the London Business School to provide accounting services.
The Student Association provides academic, cultural and social functions for the benefit of students of the London Business School and has a number of clubs who supply both specific functions and social activities, These clubs are either profession, cultural, sports or social and receive income from a variety of sources. The major ones are:
Donations
The Association receives donations from the London Business School. This is treated as outside the scope of VAT. This is because the club is not obliged to provide any goods or services in return for the monies that it has received. In a pure donation, there would be no conditions attached by the donor on the monies that it will be making available to the club.
Sponsorship
Where a sponsor attaches conditions to the monies that it makes available, then the sponsor will be expecting to receive either goods or services in return for their funding and this is subject to VAT.
Where a sponsor does not insist on any conditions but the LBSSA makes an acknowledgement of the funding in say a programme, then this is treated as outside the scope and not subject to VAT.
Education and training
LBSSA supplies periodic conferences and training courses, the income generated is exempt of VAT. The exemption also applies to catering or accommodation that is provided as part of the event as these services are treated as ‘closely related’ to the provision of education.
Social events
The VAT implications of a social event such as a night out at the theatre or a meal at a restaurant is very dependent on the circumstances and in particular, who is taking any commercial risk, as follows:
- When a Club organises a night out that will include a meal at a restaurant followed by a visit to the theatre. The Club purchases all the theatre tickets, books the restaurant, organises transport and sets a fixed ticket price for the event. The club is taking a commercial risk because it has booked all the constituent parts of the evening and depending on how many tickets it sells, it may make a profit or a loss. In these circumstances the income from the sale of tickets will be subject to VAT.(Social)
- If the Club was to organise the same event but took no commercial risk so that all those attending were responsible for the cost of the evening, i.e the costs were shared out, then there is no supply for VAT purposes. All that has happened is that a group of students have ‘pooled’ their funds together to go out for the evening and there are no tickets sold. ((Social Pooled)
Treks/events with travel/accommodation
Events are organised which include both bought in travel and accommodation. In such circumstances VAT is accounted for using the Tour Operators Margin Scheme (TOMS). So, VAT is due on the ‘margin’, the profit element, but there is no VAT recovery on the bought in supplies.
The margin is standard rated for all supplies that take place within the EU, but zero rated when the trek/event takes place in a non EU country.
Membership subscriptions
Where the benefits received by the members are essentially sport and physical recreation services, then the subscription will be exempt and therefore again there is no VAT charge. For all other membership of clubs, the income is subject to VAT.
Procedures to track track and account for the above
All events have an event code and all expenditure is charged to an event code. When a new event is requested, this event is reviewed by a member of the finance team. The team member is responsible for assigning a VAT status to the event.
The event is assigned an “S” code whereby the event income is VATable and input expenditure recoverable; or is assigned a “X” code whereby VAT may be charged on the income according to the rules above but no input VAT recovery is made.
LBSSA only reclaims VAT that is directly attributable to taxable supplies. There is no partial recovery.