VAT made simple

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VAT made simple

• Helen Elliott
• Sayer Vincent

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Introduction

• No overall exemption for charities
• Problem of irrecoverable VAT
• Partial exemption often applies
• Uncertainty over the status of supplies

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Activities for VAT
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Registration

• Taxable supplies exceed threshold
• Not retrospective
• Can claim back input VAT
• Voluntary registration
• Must have some taxable supplies

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Non-Business Activities

• Voluntary work funded by donations
• Voluntary work funded by grants
• Subsidised welfare services (85)
• Must be no service in return

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Exempt Supplies

• welfare
• residential care
• nurseries
• training activities
• medical care
• some education
• some cultural activities
• fundraising events
• renting residential accommodation
• lotteries and bingo

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Zero-rated Supplies

• Sale of donated goods
• Export of goods
• Sale of publications
• Sale of childrens clothing, some food etc. as
  normal

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Standard rated supplies

• Most sales of goods and services
• Consultancy fees
• Management charge to trading subsidiary
• Royalties

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VAT status?

• Membership subscriptions
• Education and training
• Sponsorship
• Grant or contract

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Fundraising Events

• Can have up to 15 events of similar type in one
  year in one location
• Exclude small-scale events (lt1,000)
• Cannot compete with commercial providers
• Include participatory events, not holidays

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Challenge events

• Potentially trading
• May need TOMS
• Seek clearance from HMRC in advance

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VAT Recovery

• Must be VAT registered
• No recovery for non-business purchases
• 100 recovery of VAT on taxable activity
• Possible partial exemption
• recovery of VAT on shared expenses

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VAT recovery

• Apportion input VAT in relation to income
• outside scope
• exempt
• standard-rated and zero-rated
• non-attributable
• Recovery of part of non-attributable

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Partial exemption

• Will apply if de minimis limits exceeded
• Second stage in calculations - exclude
  non-business first
• Annual adjustment will apply

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Non-attributable or residual VAT

• Apportion between VAT categories
• Fair basis - standard method is income
• propose alternative methods
• staff costs
• numbers of staff and volunteers
• floorspace
• Agree method in advance

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Zero-Rated Purchases

• Available to all charities even if not VAT
  registered
• Aids for disabled
• Disabled access
• Ambulances and vehicles
• Collecting tins, badges

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Advertising

• All advertising
• Includes recruitment advertising
• Any media
• Excludes direct mail
• Excludes charitys own website

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Property

• VAT on property is complex
• Usually standard rated
• New buildings zero rated if for
• Relevant charitable purpose or
• Relevant residential purpose
• Extensions generally standard rated