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Opening a crèche in your office? Beware of these Vat implications

by , 03 November 2014
As the demand for more work and higher productivity increases, you might notice some of your employees start to complaining about their 'work life balance'.

So you decide to help them out and give them a way to juggle their family responsibilities with their work ones.

You open a crèche at work as an additional service and allow your employees to bring their children during work for a small monthly fee.

But beware! There are Vat implications here that could cost your company more than you think.

Read on to discover what they are...

 

Here's the Vat implication of starting a crèche

 
According to the Practical Vat Loose Leaf Service, crèche services are an exempt supply. This means you can't charge your employees Vat on the monthly crèche fee you want them to pay.
 
 While this is a good thing for your employees, it's not so great for you.
 
You see, whenever you offer an exempt supply you can't claim input tax on the supplies you purchased to make your service.
 
This means, if you buy items such as baby formula or toys for the crèche, you can't claim input tax on them because you offer an exempt service.
 
Here's how this will cost your company.
 
*********** Reader's choice  ***************
 
I'd like to tell you how I saved R75 327 in Vat this year. No tricks. No evasion. Just two little things I didn't know I could claim.
 
By reading this letter, it will tell you how to avoid costly Vat mistakes, save you money, time and be your CEOs favourite person when you save the company R1 000s of Rands in Vat refunds this year.
 
***************************************
 

Here's how this Vat exempt supply will cost your company more than you realise

 
This service will cost your company more because while you're paying Vat left, right and centre on your supplies, you can't claim any of it back. The reason is you're not getting any Vat in on your service to hand over to SARS, so it wants the Vat you paid.
 
This is unlike zero-rated supplies where even though you don't collect Vat because the supply has a 0% rate, you can still claim input tax.
 
So before you go and open up that crèche, stop for a moment to consider the Vat implications and what it will cost your company.
 
For more of Vat exempt supplies, check out the Practical Vat Loose Leaf Service
 


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