We had the same directly from a VAT HMRC Inspector. We wanted to put instruction and examining down as 0% VAT as the instructors/examiners were not VAT registered. He said that as the Club was providing the service of producing the invoice, we had to make everything on it subject to VAT. What I do now is get students/candidates to hire the aircraft from the Club, then enter into a separate, private arrangement with the instructor. I actually produce monthly invoices for my students, outwith the Club. The problem occurs with Trial Lessons, where the total for the flight is on the invoice. We just have to accept that the instructional element has VAT charged on it, even though there's no input tax to claim back. The Revenue clearly benefit here.
We set up our Club as a not-for-profit limited by guarantee company, with a Constitution written specifically to position ourselves with a view to becoming a Community Amateur Sports Club. The inspector said that even if our application was successful, there would still be no relief anywhere from any VAT obligation. The only slight benefit might have been a reduction in Business Rates.
TOO