A search on the governments website will confirm that any business whether a sole trader, limited company or LLP partnership is required to register & pay VAT once it’s sales hit £85,000 (details >) it is also mandatory for businesses to issue a FULL VAT invoice on transactions over £250 (here >).
Being that Lighthouse International Group has 20+ individuals selling £50 per hour mentoring sessions, £5k and £10k courses and the £25,000 “Associate Elect” package to buy-in to the business therefore it is clear the organization surpasses this. To clarify this is £85,000 of SALES not profit.
So how can it be that VAT is not being charged? Everything from the 121 mentoring sessions which should be £50 + VAT so £60 to the business buy in should be £25,000 + VAT so the sale price should be £30,000. Also for further clarification the £85,000 is for a single year of sales.
Quantity of Partners
In the video found here > Lighthouse International Group CEO Paul Waugh states the business has between “50 to 60 partners“. Being that Kris Deichler and others “bought-in” to the business as early as 2011/12 for £25,000 how can LIG not have hit the VAT threshold every year since?
Even at the low end of just 50 Associate Partner sales at £25,000 each that’s £1.25m. To keep things simple lets presume an equal number sold between 2011-2021. That’s £113,636 per year. Way above the VAT threshold and let’s not forgot this excludes ANY money from the 50 individuals selling mentoring at £50/hour each and other sales of seminars or courses (some are £5k+ each).
VAT Registration Rules
Encase anyone was wondering you cannot register your business one year for VAT then de-register then register and again and again just to optimise your tax position. As soon as you hit £85k for 1yr of sales and its expected you will hit this again in the years to come you have to stay registered.
“Partners are Self Employed” Argument
I personally have my doubts on whether clarity will ever be given on the VAT situation however to save us all time if it is addressed with a response that by saying: “we’re all self-employed so we all have our own £85,000 limit duh” I’m afraid that does not hold water.
Firstly, when presenting themselves to individuals or businesses they make it clear they are on part of an organization called Lighthouse International Group and not as John Smith Mentoring Services or whatever. Secondly the LIG website, Legends Report, their contact email address etc are all Lighthouse the partnership and thirdly all monies paid by clients go into 1 central Lighthouse International Group bank account so its clear that the LLP is the operational business.
LIG Mentors Potential VAT Liability
That being said, I do hope that LIG mentors have been advised of the potential VAT liability they individually and/or the LLP partnership (which many have bought into to the tune of £25,000) may be liable for and are potentially making worse week in week out.
Should HMRC one day in the future investigate and come to the obvious conclusion that all monies gathered by individual mentees and £25k sales of Associate Partnerships be classed as one income for the LLP business this will of course collectively exceed the £85,000/year figure they will then undoubtedly look to recover the VAT of all of the sales made from whenever sales exceeded this threshold. Based on the above this could well be from 2011 onwards if not before…
Therefore HMRC may well write to each mentor and say for all those £50 mentoring sessions you charged it should have been £50 x 20% VAT = £60 and so you owe us £10.00 for each session sold.
That of course stings but not as much as the VAT due for seminars, events and courses with of course any sales of the “Associate Elect” package being the worst. £25,000 x 20% VAT means that HMRC would expect £5,000 in VAT for every one sold! Plus interest and penalties no doubt.
These is also no limitation to how far they can go back so it could well be 10yrs or more. It will be from when the £85k of annual sales threshold was reached which seems like a long, long time ago.
Explanation Welcomed
Being that LIG has confirmed it has nothing to hide, is dedicated to being transparent and is committed to playing fair (for all other businesses need to abide by this turnover rule) then I hope this point is directly addressed so the mystery can finally be resolved. This webpage should not be considered static. I will update it should new information/explanations become available.