VAT Rules for Charities and Not-for-Profit

VAT – Charity and not for profit

We understand that the VAT rules for charities is only one of many matters that need to be managed with other responsibilities and we aim to provide an innovative service to our clients without disturbing existing relationships.

VAT for Charities and Not for Profit Sector, VAT only applies to business activities.

It can often be a challenge to work out whether a particular activity is classified as a business or non-business activity.

• If it is a business activity, is it subject to VAT or exempt?
• What are the conditions for zero-rated status to apply?
• How much VAT can be reclaimed on purchases?
• Certain activities by charities are zero rated? But which ones?
• Some activities by non-profit-making bodies are exempt from VAT.
• What is the situation if there are profits?

Some of the areas we can help Charities and Not For Profit Organisations include:

• Considering whether or not registering for VAT on a voluntary basis would be beneficial assuming that there is not a legal requirement to be VAT registered, and other VAT rules for charities.
• Reviewing existing VAT recovery methods. These may have been formally agreed by HMRC or evolved over time although in either case they can be challenged at any time by HMRC. Are these being calculated correctly and at the right time?
• Ensuring clients take advantage of charity specific VAT reliefs, and those generally available, to ensure VAT is not paid unnecessarily.
• Understanding VAT rules for charities, and considering VAT liabilities of income to decide whether an agreement entered into is a contract to supply services (possibly liable to VAT) or is grant funding or a donation.
• Reviewing VAT liabilities to ensure that any exemptions are being operated correctly.
• Considering whether there are opportunities to take advantage of concessionary treatments.
• Verifying the attribution of VAT incurred. Is VAT incurred attributed in accordance with any partial exemption method agreed with HMRC?
• Maximising the recovery of VAT on costs associated with capital projects.
• Dealing with HMRC on behalf of a client, either via correspondence or attending meetings and dealing with any follow-up action.
• Negotiating and agreeing VAT refunds with HMRC in cases where VAT has been declared in error, or not recovered where entitlement exists.
• Dealing with VAT Appeals for registered charities.

Contact us

If you would like to discuss any issue in relation to a charity and VAT call us on 0161 883 2120.

Peter has acted as a VAT consultant to a number of National not-for-profit and charity clients as well as to some other local organisations.

HMRC guidance on VAT rules for charities UK

HMRC provide some guidance for a charity and VAT in at https://www.gov.uk/vat-charities