The VAT Guide for Children’s Activity Businesses

What to Know Before You Hit the £90,000 Threshold

If you run children’s classes, sports coaching, holiday camps, tutoring, or enrichment programmes in the UK, and your turnover is creeping towards £90,000… you might be starting to feel slightly nervous.

You’ve heard about VAT.
You’ve heard horror stories.
You’ve maybe wondered, “Surely what I do is exempt… it’s for children?”

Let’s clear things up calmly and simply.

This guide is designed specifically for children’s activity providers who are getting close to the VAT registration threshold and want to understand what it actually means without the jargon.

First Things First: When Do You Have to Register?

The VAT registration threshold is £90,000 of VAT-taxable turnover in a rolling 12-month period.

That rule is set by HM Revenue & Customs (HMRC).

Two important points many business owners miss:

• It’s based on turnover, not profit

• It’s a rolling 12 months, not your financial year

If you go over £90,000 in any 12-month period, you must register.

If you’re within £10–15k of that number, now is the time to understand your position, not when you’ve already crossed it.

“But I Work With Children – Aren’t I Exempt?”

This is one of the biggest areas of confusion.

✔ Childcare Can Be VAT Exempt

Genuine childcare can be VAT exempt, for example:

• Nurseries

• Registered childminders

• Certain after-school childcare where supervision is the main purpose

But strict criteria apply, often including regulatory registration.

✖ Most Activity Businesses Are Not Exempt

If you run:

• Football or sports coaching

• Gymnastics

• Dance schools

• Drama classes

• Holiday camps

• Tutoring

• STEM clubs

• Enrichment programmes

These are usually considered standard-rated services.

Even if they are educational.
Even if they benefit children.
Even if parents see them as developmental.

In most cases, once VAT registered, you charge VAT at 20%.

That surprises a lot of people.

What Does VAT Actually Get Charged On?

If you become VAT registered, you’ll need to add VAT to:

• Class fees

• Camp fees

• Membership fees

• Registration fees

• Merchandise (kit, uniforms, T-shirts)

This is called output VAT, the VAT you collect from customers and pass on to HMRC.

The Bit That Sounds Better: What You Can Claim Back

Once VAT registered, you can reclaim VAT on many business expenses, known as input VAT.

This might include:

• Venue hire (if VAT is charged)

• Equipment

• Marketing

• Accountancy

• Software

• Website development

• Training courses

• Stock purchases

If a VAT-registered supplier charges you VAT, you can usually reclaim it.

For some businesses with high costs, this makes a noticeable difference.

What You Cannot Claim

You generally cannot reclaim VAT on:

• Wages

• Your drawings or salary

• Personal expenses

• Most entertaining

• Payments to non-VAT registered suppliers

And if part of your business is genuinely VAT exempt, for example childcare, reclaiming VAT becomes more complex.

The Big Question: What Happens to Your Prices?

Here’s where it gets real.

If your customers are mainly parents, who can’t reclaim VAT, then VAT changes things.

Example:

If your class is £10:

• Add VAT → £12 to the parent

• Keep it at £10 → you only keep £8.33

That difference comes straight out of your margin.

For children’s activity businesses that operate on tight margins already, this needs careful thought.

So… Should You Stay Under the Threshold?

Some businesses consciously manage their turnover to remain below £90,000.

That might mean:

• Limiting class sizes

• Not expanding into new venues

• Turning away bookings

This is legal, as long as you’re not artificially splitting one business into two to avoid VAT.

But you have to ask yourself:

• Am I holding my business back?

• Is growth actually more profitable, even with VAT?

• Would restructuring pricing make this manageable?

When VAT Registration Can Actually Be a Positive

VAT isn’t always bad news.

It can make sense if:

• You have high VATable costs

• You work with schools or organisations who can reclaim VAT

• You want to scale without watching the threshold every month

• You’re ready to grow beyond “lifestyle business” level

There’s also the VAT Flat Rate Scheme, which can simplify things in certain cases, but it depends heavily on your numbers.

The Key Thing Most Owners Don’t Do

They don’t forecast.

They watch their bank balance.
They watch bookings.
But they don’t project turnover 6–12 months ahead.

And that’s where VAT catches people out.

If you’re already close to £90k, the smartest thing you can do is:

• Track rolling 12-month turnover monthly

• Model what happens if you grow 10–20%

• Understand your margins before VAT becomes compulsory

You Don’t Need to Panic – But You Do Need a Plan

VAT isn’t something to fear.

But it is something to prepare for.

The earlier you understand how it affects:

• Your pricing

• Your profit

• Your growth plans

…the more control you have.

Want Help Working Out What This Means for Your Business?

Every children’s activity business is slightly different.

A dance school looks different from a football academy.
A tutoring centre looks different from a holiday camp provider.

If you’re within £15k of the VAT threshold, or think you might be within the next year, I offer:

✔ A VAT Readiness Review

We’ll look at:

• Your turnover trends

• Your customer mix

• Your margins

• Whether exemption could apply

• Whether voluntary registration makes sense

And you’ll leave knowing your options, not guessing.

If you’d like reassurance that your bookkeeping and VAT treatment are set up correctly, Numero Bridge provides friendly, practical support to children’s activity providers.

You can learn more at www.numerobridge.com, email info@numerobridge.com, or call 07761 036 682 for an informal chat.

If you quote PEBBLE and sign up as a client, you will get a 50% discount on your first month’s fees.

This guide is for general information only and does not constitute tax advice. Always seek professional advice tailored to your circumstances.