Public sector, charities and not for profits

VAT is often overlooked by many charities which can have a far-reaching impact on charity budgets. Neglecting it can be an expensive mistake.

We regularly advise our charitable clients on:

Advising on the appropriate use of grant funding arrangements or contracts for services.
Non-business and partial exemption methods to reduce and remove irrecoverable VAT costs.

Applying the correct VAT treatments to property-related transactions.
Securing zero-rating for the relevant residential purpose (RRP) and relevant charitable purpose (RCP) buildings.
Reviewing the VAT implications associated with new contracts and initiatives.

Agreeing proposed VAT treatments with HMRC.
Provision of tailored VAT training for finance staff on topical issues.
Maximising the use of charitable VAT reliefs.

Do these issues concern you?

Partial exemption
Managing irrecoverable VAT costs
Property transactions
Making Tax Digital (MTD)
Dealing with HMRC
Grant funding
Business/non-business activities

How we've helped clients

Philanthropic charity

The situation

We performed the annual adjustment calculation for the client. We reviewed the structure and activities of the charity, including the use of a wholly owned trading subsidiary which was separately
registered for VAT. The charity provided a range of taxable exempt and non-business activities. The trading subsidiary provided predominately zero rated supplies of printed material, due to the nature of their aims and objectives.

Our solution

We identified a number of areas where we could make improvements. We recommended VAT grouping for the charity and trading subsidiary. We improved the partial exemption recovery position by 20% and gave them significantly more additional overhead VAT recovery. As a result of our work we secured additional VAT savings for the charity in excess of £50,000.

The challenges

We performed the annual adjustment calculation based on the existing methodology and were able to finalise the year-end VAT position. We provided the audit team with sufficient comfort around the VAT position in order to be able to sign off the accounts.

How we've helped clients

Medical research charity

The situation

We reviewed the charity's partial exemption position. Whilst the charity has a number of taxable business activities, it also receives significant investment income, and it generates exempt interest income. We reviewed the partial exemption position to ensure VAT bearing expenditure was being directly attributed to the relevant.

The challenges

The non business income generated from the investments is passively earned and managed by a third party. We restricted the VAT in full on the charity's non business activities. The majority of the VAT bearing expenditure related to the charity's taxable business activities, which we reclaimed in full. As a result, the charity was de-minimis for partial exemption purposes in relation to its exempt input VAT.

Our solution

As part of our work, we identified that the VAT
invoices issued for the royalty fees were incorrect. We corrected the position with the third party distributor which has delivered additional savings of approximately £250,000 over the last two years. We continue to support the client in managing its partial exemption.