VAT on rent of books??

W

where_to_now

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Hi all,

I'm thinking of starting a small business where I would rent books to students for a fee to save them buying books which are only used for one term / semester
. I won't go into the details here but my feedback from research is that there would be an interest in it.

My question is in relation to VAT.

I know I can buy the books without VAT, and sell them without charging VAT, or at least I think I know that I can :D

If I rent a book to someone at say 50% of the cost price is the rent vat exempt? If it isn't the idea is a dead duck.

Thanks in advance!
 
I'm not surprised at the lack of a response. Rang the revenue today, hadn't ever heard of it happening and didn't know.

They have said that they will get back to me with an answer.
 
Ahhh I wont expect Revenue to reply no offence to them!!!!

I would imagine the rental of books is treated no differently from the sales of books. The zero rate of VAT would apply.

The VAT law specifically zero rates the "supply of printed books and booklets"

[broken link removed]

My view is that "supply" means simply that a supply of something albeit the rental or puchase
 
Supply of goods and supply of services are both defined in the VAT Consolidation Act. A supply "in relation to goods" involves the transfer of ownership. There is no transfer of ownership here so it must be a supply of a service.

The supply of books is zero rated. The relative section states the zero rate applies to goods or services of a kind specified in the relevant Schedule. The schedule lists various supplies of goods (including books) and services.

The hire or rental of books isn't specified in the schedule.
 
Smeharg always interested in your contribution on VAT.
I would concur with your view and therefore as the hire of books is not listed in that schedule does it fall into the standard 23%.
 
Thank you Joe.

I would say 23% rate applies. For the zero rate to apply you'd need to successfully argue that "of a kind specified" is sufficiently wide to include the goods listed whether sold or hired. I'd interpret "specified" to be very narrow. Perhaps, the courts would think otherwise but I doubt it.
 
Hi Guys,

Thanks for your feedback. The guy in Revenue was pretty useless in fairness, he just read the section of the website about commercial libraries to me - which i had done myself before ringing :rolleyes:

23% vat on hire of books - Yikes!

Would it be covered under the supply of educational goods and services incidental to education?

From Revenue.ie.....


3.4. Treatment of Supplies of Goods or Services Incidental to Education
As mentioned at Paragraph 2 above the supply of supply of goods and services (excluding research services) incidental to education or vocational training and retraining is exempt from VAT.

For example the supply of material to accompany an educational course, such as goods and services that would normally be subject to VAT if supplied separately, may be treated as ancillary to the supply of the educational service and exempt from VAT. Examples are books and written materials to accompany the course, or services such as photocopying and binding. The exemption will only apply where the goods or services are supplied, either by the college or a third party authorised to supply such materials, to students who are enrolled in a course of education.

Where goods or services are made available to a prospective student for purchase without further obligation such as enrolling in a course, or to any other persons, the supply is treated as liable to VAT at the appropriate rate.

It should be noted that goods and services are treated as incidental to education only where they are directly linked to the education service itself.


What do you think? If the books are only rented to students with the permission of the college?
 
where_to_now said:
From Revenue.ie.....

For example the supply of material to accompany an educational course, such as goods and services that would normally be subject to VAT if supplied separately, may be treated as ancillary to the supply of the educational service and exempt from VAT. Examples are books and written materials to accompany the course, or services such as photocopying and binding. The exemption will only apply where the goods or services are supplied, either by the college or a third party authorised to supply such materials, to students who are enrolled in a course of education.

Where goods or services are made available to a prospective student for purchase without further obligation such as enrolling in a course, or to any other persons, the supply is treated as liable to VAT at the appropriate rate.

It should be noted that goods and services are treated as incidental to education only where they are directly linked to the education service itself.

What do you think? If the books are only rented to students with the permission of the college?
Click to expand...

Are these books only of use to students enrolling on a certain course and are mandatory for that course? If, say, they were generic brain-surgery textbooks for RCSI courses only - and sold by a few booksellers; then VAT would apply. However if the RCSI entered into an agreement with a publisher and distributor to print, and sell the books under monopoly; then the exemption applies.

Caveat:- all the above IMHO.
 
Are you certain that you would be able to purchase the books for the sole purpose of renting out to people without VAT?
You are buying the books for commercial reasons and the exemption seems to apply for books for educational use...not commercial use, which you as purchaser intend to put them to. Also, would you be able to qualify as an 'eligible third party'?
If I am right with the above, then you would also be charging VAT on the rental. As VAT is one of the, if not the most complex area of tax, you need to talk to a specialist here.
 
@Where_to_now

That might work. You'd need to determine what "an authorised third party" is, who does the authorising and what criteria must be satisfied

If this was an option then you would be making exempt supplies which means you wouldn't be able to register for VAT in respect of those supplies or reclaim VAT on you purchases. (Selling books is VATable at zero percent which is not the same as VAT exempt)

From, an (non-VAT) business perspective it may be more difficult to establish a customer base. Presumably you would need to enter into exclusive agreements with educational establishments and wouldn't be able to target students directly.
 
Hi all,

thanks for the replies.

Revenue have informed me that the rental of books is subject to VAT at the standard rate. So there ya go!

Thanks for the advice
 
No problem. Just another quick question.

If the turnover was below the threshold for services there would be no vat either way?

If only selling books at zero vat but paying vat on all expenses would I be due vat back?

Exempt vat such as in the example above is not taken into account in a vat return?

Thanks in advance again, it's a mad area.
 
As advised before-you need to engage the services of a professional!!

In answer to the above-no, not possible to recoup full vat expenses against a supply which is zero rated for VAT. You may be able to recover some VAT if there was some supply that was rated for VAT.

It's very complex-really, you should pay for solid advice and don't trust Revenue, their advice is not binding, and not always accurate.
 
Luternau said:
In answer to the above-no, not possible to recoup full vat expenses against a supply which is zero rated for VAT. You may be able to recover some VAT if there was some supply that was rated for VAT.

.
Click to expand...

This shows a clear misunderstanding of the difference between zero rated sales and exempt sales.

Zero rated sales are VATABLE sales and as such the trader is entitled to recover the VAT on inputs. But the advice still stands seek professional advice.
 
Thanks folks,

Like I said I appreciate the advice. I haven't much personal business experience but. Most of my family seem to have ended up running their own shows so I have a fair idea of some,areas.

I fully accept the need for professional advice but I have to say some accountants have no interest in or imagination for business - they just want a fee for doing accounts, or doing nothing in some cases, then on the other hand there's the ones who have too much imagination and could land you in trouble! Have to find a middle ground!

Anyway thanks for the,advice again.
 
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