Do charities need to register for VAT?

If a charity’s taxable supplies exceed the VAT registration threshold then the charity must register for VAT. A charity is no different from any other entity in this respect, except that often most of a charity’s activities are exempt from VAT, or outside the scope of VAT, and therefore do not count towards the threshold.

What special VAT provisions apply to charities?

Many types of sales are exempt when made by a charity (or other eligible body). The most important of these are:

  • Education and training
  • Health and welfare
  • Sport and recreation
  • Cultural services
  • Fundraising events

In addition, a number of zero rating (or reduced rating) reliefs apply to expenditure by charities, for example:

  • Power
  • Property
  • Disabled aids

The operation of these provisions is often highly complex.

Other VAT issues commonly encountered by charities and social enterprises

As well as the specific provisions, examples of which are listed above, charities and social enterprises often encounter a number of other complex VAT issues.

  • Subscriptions – the VAT treatment depends broadly on what is being supplied, and will differ in each case
  • Grants and donations – these are generally outside the scope of VAT, but it is not always clear what is a grant and what is a payment in return for services, which might attract VAT (or be exempt). To determine the VAT treatment, it is necessary to look at the detail of the agreement and at what is actually being provided.
  • Partial exemption – where an organisation has some taxable supplies and some exempt supplies, then it needs to allocate its overhead VAT between the taxable and exempt supplies.

How Slade & Cooper can help

If we prepare your accounts and do your audit or independent examination then as part of that work we may review whether or not there is any likelihood that the organisation will have to compulsorily register for VAT.  In this situation, we will advise you accordingly. If you are already VAT registered we will review any partial exemption method in place.

We can also:

  • Prepare VAT returns on a quarterly or annual basis
  • Prepare your annual partial exemption adjustment
  • Provide VAT consultancy on a particular issue
  • Provide a VAT health check

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