Night clubs and VAT
You will have to register for VAT if your taxable sales are likely to be above the current VAT threshold. You will then have to charge VAT at the standard rate of 20% on the items you sell - such as food and drink - and the services you provide - this is known as 'output tax'. You will be able to reclaim any VAT you pay on purchases - this is known as 'input tax'.
Every quarter you will pay HM Revenue & Customs (HMRC) the difference between:
- all the output tax you have charged
- all the input tax you have paid on your purchases
Nearly all businesses have to pay their VAT bill electronically - for example by direct debit or online banking. HMRC allows you some time at the end of each quarter before you have to pay the VAT due. So, for example, the VAT due on sales made in months one, two and three would be paid at the end of month four. Your VAT return will show your payment deadline date.
Businesses that are having trouble making their VAT payments, or are worried that future payments will cause them problems, can ask for help from the HMRC Business Payment Support Service. If your business needs this financial assistance to tide it over, HMRC will look at your situation and discuss temporary options that could help out. These could include letting you make payments over a longer period and waiving late payment surcharges. To discuss payment problems with HMRC you can call the Business Payment Support Service Helpline on 0300 200 3835.
Standard rated supplies include:
- admission charges
- sales of alcohol and soft drinks
- catering activities, crisps and snacks
- tobacco products
- amusement machine and pool table takings that do not fall within the scope of Machine Games Duty
- sales of merchandise such as T shirts
Machine Games Duty (MGD)
Since 1 February 2013 Machine Games Duty (MGD) has replaced both Amusement Machine Licensing Duty (AMLD) and VAT on most gaming machines - those that offer a cash prize that's more than the cost of playing the game. There are two rates of MGD that could apply to machines that can be legally sited in a nightclub - the 20% rate that applies to the higher stakes and prizes Category C machines and the 5% rate that applies to the lower stakes and prizes Category D machines. (The higher rate of 25% from April 2015 only applies to high stakes machines offered in casinos and betting shops.) You pay MGD to HMRC every quarter. MGD is due on the net takings from the machines - that is the gross takings less the amount paid out as winnings.
You can contact the VAT Helpline on 0300 200 3700 to request further guidance if you need it. There are also helpful leaflets available on the Gov.uk website, including VAT Notice 700/1, Should I be Registered for VAT?, Notice 709/1, Catering and take-away food, Notice 701/29, Betting, gaming and lotteries and Excise Notice 452: Machine Games Duty.
You will have estimated your monthly sales income. Now decide whether you must register for VAT. If so estimate the approximate amount of VAT that you will have to pay every quarter.
Making Tax Digital (MTD) for VAT
Under HMRC's Making Tax Digital initiative, VAT-registered businesses with taxable turnover above the VAT threshold must keep records digitally and use special software to submit their VAT returns. You can find out more about MTD on the Gov.uk website.
Alternative flat rate scheme
You might be interested in an optional flat rate scheme (FRS) for eligible small businesses. Under this scheme you continue to issue tax invoices to VAT registered customers, but the VAT payable every quarter is calculated as a percentage of your VAT-inclusive turnover. You apply the appropriate flat rate percentage for your type of business. This scheme cannot be used with the retail schemes, the margin scheme for secondhand goods or the cash accounting scheme. You can find full details of the FRS, who can use it, and the flat rate percentages in VAT Notice 733, Flat rate scheme for small businesses. It will help you to decide whether or not the scheme is suitable for you.