Charities – planning for VAT, hoping for none

Charities – planning for VAT, hoping for none

It seems amazing that, forty-four years after VAT was introduced in the UK, so many charities – or rather people involved in running them – still appear to think that charties are exempt from VAT. That by some magic the rules on VAT will be lifted so they pay no VAT. Oh! would that that was the case. The problem with this approach is that charities fail to plan for VAT when planning projects and fund-raising. Or they seek advice from HMRC and get generic advice rather than advice specific to their situation.

Because VAT and charities create a complex situation it is hard to work out the correct VAT treatment. The criteria for relief from VAT in various areas can be confusing. Failing to make sure that the criteria are met can be expensive – the difference between paying no VAT and paying 20% VAT. It must be disheartening for those working in charities, often as volunteers, to find that they need another 20% to be able to pay for the work that the charity wants to undertake.

The advice for charities and their advisers is to get specialist VAT advice at the planning stage so that the impact of VAT on their project is fully understood and they know how much they have to raise for the project to stand a chance of going ahead. Always bearing in mind that what advice they get the law may change, VAT rates might rise or HMRC changes its policy.

Plan for the worst, and hope for the best. Every time!

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