VAT Opportunities for Charities
HMRC are not very charitable when it comes to charities and take the same stance with regards to VAT accounting errors as they do with any other entity. This was demonstrated in a recent HMRC campaign aimed at identifying small charities with a turnover of less than £1,000,000 that had incorrectly recovered input VAT on relevant costs.
Due to its complexities, charities may often view VAT as a negative force. However, here at The VAT People we have been able to identify significant VAT savings for a number of charities, ranging from reducing the VAT cost of construction work to ensuring that HMRC accept that subsidies paid by service users are outside the scope of VAT.
If you are a charity that is undertaking building work or has income above the VAT registration threshold of £90,000, it is worth contacting our free VAT helpline for guidance.
Recent case study
We assisted a client in understanding its VAT position and making a disclosure for VAT under-declared on income received from a funder that had full VAT recovery. The charity was able to pass on the VAT cost to the funder and benefited from recovering and retaining the VAT on a proportion of the costs that it otherwise would have been unable to claim. HMRC initially applied an interest penalty of £100,000 to the under-declared VAT on income which was subsequently waived following The VAT People’s intervention. The overall benefit to the client was more than £30,000