Although most charities would see all the activities they undertake in pursuance of their charitable objects as being non-business activities, from a VAT perspective, they will normally have a mix of non-business activities and business activities, meaning that they will not be able to recover all the VAT they incur on costs. Add to this the fact that charities often receive funding from donations, trading activities and grants from public sector or other funding bodies, all of which may have VAT implications, it becomes apparent that Charities VAT can be very complex.
We have significant experience of working with charities to assist them to maximise the VAT reliefs available and to manage VAT compliance. For example:
- an HMRC visit to a charity’s trading company resulted in assessments of £32k. After correspondence with HMRC Registration Unit we were able to recover the VAT assessed by registering the charity for the relevant period. Some 18 months later the original visiting officer sought to claw back this refund, but we successfully argued the legitimacy of the claim.
- a charity constructed an extension to its premises. We were asked to review the projected VAT costs of £150k. Due to the proposed use of the new building, we were not able to argue for zero-rating under the relevant charitable purpose relief, but we did secure a 30% recovery rate on the VAT paid using the Capital Goods Scheme.