Press Release - OPTICIANS VAT matters AEL February 2003

It was reported in OPTICIAN magazine last week (Feb 21st page 6) that practitioners would face a potential VAT pitfall if they elected to change the status of their practice to a limited company.

VAT consultants Alexander Edward Lee (AEL), who specialise in providing VAT advice for Opticians, do not believe that small practitioners would be disadvantaged.

AEL Partner Marc Bennett, whose firm has advised in excess of 100 Independent Opticians in their dealings with Customs & Excise, stated :

“ Customs & Excise policy in this respect was originally set out in 1997. They broadly advised that dividends should not be taken into account to support the full cost apportionment method. Their rationale centred on the dividends being paid out in respect of being an investor rather than any services that the shareholder may provide to the practice concerned.

This policy has repeatedly been communicated to us by local VAT officers, even after they have approached the Customs Policy Division for direction.
However, following formal appeal by AEL, Customs & Excise have now agreed to accept our argument that for smaller scale owner-managed practices, the dividends would be acceptable as salary in the full cost apportionment calculation.

It appears that Customs and Excise had larger companies in mind when formulating their policy and they confirmed the AEL interpretation last year by quoting their own internal directive to corroborate our appeal.

Whilst each case should be viewed on its own merits, we would strongly advise independent Opticians and their advisers to review cases where Customs & Excise have not allowed dividends to be included in calculations for owner managed businesses.”

For further information relating to OPTICAINS VAT matters, please contact either Marc Bennett or Andy Kontakkis at Alexander Edward Lee.