Industry sector: Leisure

Pool hall: VAT

Pool halls and VAT

The goods and services supplied by your business are likely to be taxable for VAT purposes.

Taxable supplies

You must register for VAT once your taxable sales have reached the current VAT threshold. You will have to charge VAT on the services you offer and goods you sell - this is known as 'output tax'. You will be able to reclaim any VAT you pay on purchases - this is known as 'input tax'.

There are two main rates of VAT:

  • standard rate (currently 20%)
  • zero rate

(In addition some goods such as fuel for domestic use are subject to a reduced rate, currently 5%.)

Every quarter you will pay HM Revenue & Customs (HMRC) the difference between:

  • the output tax you have charged, and
  • 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

Most of your supplies will be standard rated, for example:

  • membership fees
  • amounts received for games of snooker, pool, table football and so on
  • retail sales of snooker and pool accessories
  • alcoholic and soft drinks
  • catering activities (food/drink to be consumed on the premises)
  • tobacco products
  • crisps and similar snacks

If you offer machine games that offer a cash prize that's more than the cost of playing the game you'll need to pay Machine Games Duty (MGD) on the net takings to HMRC each quarter.

Contact the VAT Helpline on 0300 200 3700 for more information if you need it. There are also a number of helpful publications on the website, including VAT Notice 700/1, Should I be Registered for VAT?, VAT Notice 701/45, Sport,VAT Notice 701/5 Clubs and Associations, VAT Notice 701/29, Betting, Gaming and Lotteries and VAT Notice 452, Machine Games Duty.

The helpline will also be able to advise you on using one of the retail schemes. These schemes are used by businesses which deal mainly with members of the public.

Your market research will have helped you to estimate your sales income every month, including VAT. Now you will have to estimate approximately how much VAT you will pay every quarter.

Most if not all of your sales will be standard rated, so for convenience you might assume that the total of three months sales income would include VAT at 20%. To calculate the amount, multiply your three months sales total by the VAT fraction 1/6.

This will give you the figure for output tax due. You can take away from this the VAT you will pay on your purchases. Many of the payments you make during each three month period will include VAT at the standard rate, but for the sake of simplicity you should just look now at the payments you have estimated for 'Payments to creditors' and 'Cash purchases'. Purchases of food for your catering activities will generally be zero rated, so exclude from your three months costs figures the amount you have estimated you will spend on food. Now multiply your three months costs total by the VAT fraction, 1/6.

This will give you the figure for input tax, which you should now deduct from the output tax figure. The balance goes in the cash flow at quarterly intervals.

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 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.