VAT and Property Transactions: Navigating Costly Traps
Property VAT is one of the most complex and high-risk areas for businesses. The sums involved are large, the rules are technical, and the penalties for mistakes can be severe.
At ETC Tax, we regularly see avoidable VAT errors that lead to irrecoverable costs, HMRC disputes, or costly deal delays.
With this in mind, we have put together a checklist to help you avoid the most common traps.
The Option to Tax (OTT), Miss It and Pay the Price
Why it matters:
Opting to tax allows a business to charge VAT on rent or sales and reclaim VAT on associated costs (like refurbishments or legal fees). However, an OTT is only valid if properly made and recorded.
Check that:
The OTT has been formally notified to HMRC.
The landlord’s position is confirmed in writing.
Accurate records of the election are kept for future reference.
Common mistake: Assuming an OTT was made when it wasn’t. We often see clients who have incurred six-figure refurbishment costs, only to find their VAT claim rejected because no valid OTT was in place.
Tip: Always confirm OTT status before incurring expenditure.
Transfer of a Going Concern (TOGC), Relief or Risk?
Why it matters:
Where a property sale is part of a wider business transfer, VAT may not apply if the deal qualifies as a TOGC. This saves VAT on the purchase price and reduces SDLT, but only if strict conditions are met.
Check that:
Both buyer and seller are VAT-registered.
The property will be used for taxable business purposes.
Any Option to Tax is valid and in place.
Common mistake: Assuming TOGC applies without checking the conditions or obtaining VAT registration in time.
Tip: Confirm TOGC eligibility early; structuring errors can add millions to a deal.
Partial Exemption, Managing Mixed Supplies
Why it matters:
If your business makes exempt supplies (e.g. residential lettings, education, health, or finance), you may not be able to recover all input VAT. The partial exemption rules determine how much you can reclaim.
Check that:
The standard method of VAT recovery produces a fair result.
You’ve considered applying for a special method if the standard one is unfair.
Any special method is agreed with HMRC in advance.
Tip: Specialist advice can help negotiate fairer recovery rates and defend them in HMRC reviews.
Overlooked Areas, Deposits, Inducements, and Break Payments
Why it matters:
Payments such as deposits, lease inducements, dilapidations, and break fees can all have VAT implications. HMRC has become increasingly aggressive in challenging incorrect treatments.
Check that:
You’ve identified all side payments in the transaction.
You’ve clarified whether each payment is consideration or compensation.
VAT advice has been sought before contracts are signed.
Common mistake: Reviewing VAT treatment after signing agreements, when it’s too late to change the terms.
Tip: Early review avoids disputes and unplanned VAT costs.
Why Specialist VAT Advice Matters
Property VAT is too complex to rely on assumptions or generalist advice. Getting specialist input early protects both value and compliance.
Contract and lease reviews to confirm VAT treatment.
Advice on Options to Tax and TOGC eligibility.
Support with partial exemption calculations and HMRC negotiations.
Guidance on complex payments (deposits, inducements, break clauses).
Representation in HMRC disputes or recovery challenges.
Next Steps
VAT on property can be difficult to navigate, but with the right planning, most risks are avoidable.
Missed OTTs, incorrect TOGC assumptions, poor partial exemption management, or overlooked payments can all cost thousands, but with early specialist advice from ETC Tax we can safeguard VAT recovery and keep your transactions on track. Please get in touch to find out how we can support you.
A Guide to VAT Compliance for Influencers with Sudden Income Spikes
The world of influencers moves fast, one viral post can turn a side hustle into a six-figure business overnight. But sudden jumps in income bring tax and VAT obligations that can’t be ignored. This guide explains when VAT registration is triggered, what income counts towards the threshold, and how to stay compliant while keeping creative work the priority.
Why Influencers Need to Think About VAT
Influencers earn from many sources: brand collaborations, sponsored content, affiliate links, merchandise sales, digital products, event appearances, and more. Individually, these may not seem huge but combined, they can push VAT-taxable turnover over the registration threshold.
For 2025, the VAT registration threshold is £90,000 in any rolling 12-month period. This is not per tax year, it’s calculated on the last 12 months of business activity, no matter when the start date is. If total taxable turnover exceeds this figure, the business must register for VAT.
Also if there is an expectation that the £90,000 may be exceeded in the next 30 days alone. You have to register by the end of that 30-day period. Your effective date of registration is the date you realised, not the date your turnover went over the threshold.
Sudden Spikes in Income
Many influencers see their earnings grow gradually. Others experience sudden jumps such as a viral campaign, a big brand deal, or a surge in merchandise sales after a trending post. HMRC doesn’t consider how the growth happened only when the turnover crosses the threshold.
Example:
January – August: £45,000 turnover.
September: £50,000 brand partnership payment.
The rolling 12-month total is now £95,000. The VAT threshold has been exceeded and registration must be completed within 30 days of the end of the month in which the threshold was crossed.
What Counts Towards the VAT Threshold
The value of all VAT-taxable supplies must be included, even if charged at 0% VAT (zero-rated). For influencers, this often includes:
Sponsored social media posts and campaigns
Affiliate marketing income
Sale of goods such as merchandise or books
Sale of digital products like courses, e-books, or presets
Appearance fees, event speaking, and hosting
It does not include genuine gifts with no obligation to promote, or payments outside the scope of VAT such as certain grants or personal gifts.
Are You Ready to Handle VAT When Income Spikes?
If earnings jump unexpectedly, is there confidence in spotting the moment the VAT threshold is crossed? Questions that need answering include:
Is turnover tracked each month to monitor when the £90,000 threshold is close?
Is there an understanding of the exact date the VAT registration clock starts ticking?
Which VAT scheme would be most efficient for the business model?
Will invoices meet HMRC’s legal requirements?
Has the impact of VAT on pricing and profits been considered?
Getting these right can be the difference between smooth compliance and an expensive HMRC headache.
Through ETC Tax, the team works with influencers and fast-growing businesses to:
Monitor income and anticipate VAT registration deadlines.
Recommend the most tax-efficient VAT scheme for each situation.
Guide businesses through the registration process from start to finish.
Ensure invoicing and pricing strategies remain profitable and compliant.
Common VAT Pitfalls for Influencers
Ignoring foreign income rules – services supplied to overseas clients may have different VAT treatments.
Barter deals and gifted goods – valuable items in exchange for promotion may be taxable at market value.
Late registration – can lead to backdated VAT bills, interest, and penalties.
Not setting aside VAT funds – VAT collected is owed to HMRC, not available to spend.
Why Professional Advice Matters
VAT for influencers can be more complex than it appears. Brand collaborations may cross borders, digital product sales can have special place-of-supply rules, and income streams may involve mixed rates. Engaging a VAT specialist early helps to:
Choose the most efficient VAT scheme
Avoid unexpected VAT bills on international sales
Keep compliant records for HMRC
A viral moment can change a career but it can also trigger VAT obligations almost overnight. Staying aware of the threshold, knowing what income counts, and acting quickly can prevent penalties and cash flow shocks.
For influencers experiencing rapid growth, ETC Tax can provide the guidance needed to register, manage VAT across multiple income streams, and maintain compliance while focusing on creative output, get in touch today.
Top 5 Tips: Reclaiming VAT on Entertainment & Staff Expenses
Understanding what VAT you can and can’t reclaim can save your business money — and help you stay on the right side of HMRC. Here’s your quick-reference guide to get it right.
1 Business Entertainment – No VAT Recovery
Definition: Hospitality for non-employees (e.g., clients or suppliers).
Examples:
Client meals and drinks
Tickets to concerts or sports events
Corporate hospitality days
VAT Tip:
❌ You cannot reclaim VAT on these expenses — HMRC considers them a business choice, not a necessity.
2 Staff Entertainment – Full VAT Recovery
Definition: Entertainment solely for employees (excluding directors, partners, and sole traders).
Examples:
Staff parties or BBQs
Team-building days
Staff award events
VAT Tip:
✅ You can reclaim full VAT — but only for employees (not directors or owners).
3 Mixed Entertainment – Partial VAT Recovery
Definition: Events where staff and clients attend together.
VAT Tip:
✅ Reclaim VAT on the staff portion only where acting as non-hosts (excluding directors).
❌ No VAT recovery on the client portion.
Example:
A dinner for 10 staff and 5 clients → You can reclaim two-thirds of the VAT.
4 Staff Expenses You Can Reclaim VAT On
Business travel meals
Hotel stays for business
Office supplies and equipment
VAT Tip:
✅ Make sure the expense is for business use only.
You cannot reclaim VAT on:
Commuting costs
Personal items
Anything for private benefit
5 Keep Strong Records
Keep valid VAT invoices for all expenses
Clearly separate staff and client costs on invoices
Review expense policies regularly
VAT Tip:
✅ Good record-keeping makes reclaiming VAT easier and safer during inspections.
Final Reminder:
❌ No VAT on client entertainment
✅ Full VAT on employee-only events (non-directors)
➗ Apportion VAT for mixed events
📄 Keep detailed records
Need Help?
VAT rules can be tricky — mistakes could lead to costly penalties. If you would like further VAT advice, Jane Deeks will be able to assist on all VAT matters, please drop us an email – enquiries@etctax.co.uk
Essential Compliance for DJs and Musicians Working Abroad
Introduction
For DJs and musicians, performing internationally can be both exciting and lucrative. However, crossing borders for gigs often brings tax and VAT obligations that must be understood to avoid costly mistakes. This guide explains how VAT applies to international performances, what to watch out for in contracts, and how to stay compliant when working abroad.
Why VAT Matters for International Performances
When DJs and musicians perform abroad, the rules for VAT can vary depending on the country, the type of service provided, and whether the client is a business or a private individual. Even short-term tours or one-off performances can create VAT obligations in the destination country.
Understanding the ‘Place of Supply’ Rules
VAT rules often hinge on the ‘place of supply’, the country where a service is deemed to take place for tax purposes. For live performances and cultural events, the place of supply is typically where the event physically occurs. This means a UK-based DJ playing in France will usually be subject to French VAT rules for that performance.
If the event organiser is a business registered for VAT in the performance country, they may apply a reverse charge mechanism, meaning no local VAT is charged on the invoice. If the organiser is not VAT registered, the performer may need to register for VAT locally.
Common VAT Scenarios for DJs and Musicians Abroad
Performing for a VAT-registered event organiser is often handled via the reverse charge, but needs correct invoicing.
Performing for a non-VAT registered organiser or private client may require VAT registration in the country of performance.
Selling merchandise at gigs abroad can create local VAT obligations separate from performance fees.
Contract and Pricing Considerations
When accepting an international booking, contracts should clearly state whether fees are inclusive or exclusive of any applicable VAT. Failure to agree this up front can leave the performer absorbing the VAT cost, reducing profit margins. It is also wise to confirm which party is responsible for handling VAT registration or compliance in the destination country.
Are You Prepared for International VAT Compliance?
Before heading abroad for a gig, DJs and musicians should ask themselves:
Do I know the VAT rules for performances in the country I’m visiting?
Will my client handle VAT, or will I need to register locally?
Am I correctly invoicing to meet both UK and overseas VAT requirements?
Have I considered the VAT impact of merchandise sales abroad?
Through ETC Tax, the team works with touring artists to:
Review contracts for VAT clauses and compliance.
Determine VAT obligations in each performance country.
Assist with overseas VAT registration where required.
Ensure invoicing meets both UK and foreign tax rules.
Common VAT Pitfalls for International Performers
Assuming UK VAT rules apply everywhere, local rules often override.
Ignoring merchandise VAT, physical sales abroad can trigger extra compliance steps.
Not factoring VAT into performance fees, unexpected costs can erode profits.
Poor record-keeping and lack of proper invoices or proof of tax treatment can cause disputes.
Why Professional Advice Matters
International VAT rules are complex and vary widely between countries. Professional advice ensures that DJs and musicians remain compliant, avoid unnecessary tax bills, and structure their bookings in the most tax-efficient way possible.
Performing abroad can boost both reputation and income, but ignoring VAT obligations can quickly turn a great opportunity into a costly problem. With careful planning and the right advice, artists can enjoy international gigs without falling foul of foreign tax authorities.
ETC Tax supports DJs and musicians in navigating cross-border VAT, ensuring every performance is compliant and profitable.
Since 1 January 2025, private school tuition and boarding fees are charged 20% VAT, a dramatic shift from the historic exemption.
Schools billing terms that begin 2025 or later must register if their taxable turnover exceeds the £90,000 threshold.
Key points:
Nursery education remains exempt.
Ancillary services (meals, transport, stationery) are still exempt if billed separately
Anti-forestalling rules mean any fees invoiced or pre-paid from 29 July 2024 for terms from January 2025 are taxable.
2. The Capital Goods Scheme Explained
The Capital Goods Scheme allows schools to reclaim VAT on significant capital investments over £250,000 on land/buildings spread across 10 years. Computers and IT equipment over £50,000 over 5 years are also included.
Previously blocked VAT claims on, say, a sports hall built five years ago now become eligible once the school is VAT-registered after January 2025.
Recovery will match the asset’s taxable-use percentage year-by-year – the CGS adjustment schedule runs automatically unless you set up a bespoke method.
3. Why This Is a Game-Changer for Schools
Retrospective Reclaim Opportunity
Historically exempt status meant no VAT recovery on big capex. Now, schools can retroactively claim VAT paid on capital works within the past 10 years under CGS.
For example, a £1.2m sports hall with £240k in VAT could yield £24k reclaimed annually over 10 years.
Improved Cash Flow & Lower Net Costs
Capital expenditure becomes effectively 20% cheaper, easing future investment plans. It’s a big incentive even as fee income takes a hit.
Perform partial exemption calculations (standard or bespoke).
Track CGS adjustments annually.
Small schools with limited capex lose out unless they agree special methods with HMRC—elite institutions may prosper while smaller ones struggle.
4. School Duties & Deadlines
By January 2025: VAT-registration and MTD setup completed.
As soon as capital expenditure is found (last 10 years): Initiate CGS calculations.
Quarterly returns onward: Apportion VAT on costs and capital, and account for CGS adjustments.
Long-term: Monitor use changes annually and adjust CGS numbers.
5. Who Gains & Who Loses?
Big schools (like Eton): Big capital investments mean large CGS paybacks—significant cash recovery
Smaller schools: Less capital spent, fewer claims—burdened by additional admin and VAT, some may be forced to close
Parents: Fees up ≈ 20%, but schools can offset some cost after VAT recovery—net cost hike will be closer to 15% on average
Conclusion
The introduction of VAT on private school fees represents one of the most significant changes to the education sector in decades. While the 20% charge creates immediate pressure, the Capital Goods Scheme offers a crucial lifeline for institutions with substantial recent capital investments.
Schools must act swiftly to maximise CGS opportunities. Those with heavy facility investments over the past decade could see substantial VAT recoveries offsetting reduced pupil numbers, but success requires proper planning and potentially bespoke HMRC arrangements.
Well-established schools with significant infrastructure will weather this storm better than smaller institutions on tighter margins.
Professional VAT advice is essential. The complexity of partial exemption calculations, CGS adjustments, and compliance requirements means getting it wrong could be costly, while getting it right provides vital financial breathing room.
Jane Deeks is a VAT specialist with 30 years’ experience advising businesses across all sectors. She works with ETC Tax, providing expert VAT guidance to help clients navigate complex regulatory changes.
Next Steps
Don’t navigate these changes alone. Contact ETC Tax today to ensure your school maximises its VAT recovery opportunities and stays compliant with the new regulations.
Our client was a provider of online music streaming services, with a focus on the broadcast of DJ sets and ‘educational sessions’.
Issue
Because the client provided a mix of live content and prerecorded content, the VAT position wasn’t as straightforward as it might have been, and the client was concerned that they would have the liability to register for VAT in multiple jurisdictions.
How we solved it
We reviewed the client’s service offering and advised them on how VAT would apply in the UK, the EU and elsewhere.
The outcome
The client was able to move forward with its business in the knowledge that it was only liable to register for VAT in the UK and the EU (via a One Stop Shop VAT registration)
Next Steps
VAT can be difficult to navigate but here at ETC Tax we can help you out! Drop us an email today.
