This information is reproduced from Sandy Adirondack’s legal update emails for voluntary organisations. To subscribe to these emails, send details to firstname.lastname@example.org.
VAT is an extraordinarily complex tax, but organisations which ignore it do so at their peril. Any organisation, including a charity, which does not register when it has to will face substantial penalties (the registration threshold for 2018-19 and 2019-20 is £85,000 of taxable business supplies – goods or services – in any 12-month period or expected within the next 30 days).
An organisation can register voluntarily if it makes taxable supplies, but its level of these is below the threshold. If it does not do this when it would be advisable to do so, it may lose the opportunity to claim back some VAT it has paid. But the decision to register voluntarily is complex, and should never be taken without advice from a VAT specialist (and for charities, this specialist should have expertise in charity VAT).
Whether a charity is registered for VAT or not, it should be aware of the reliefs available to charities, for example on much charity advertising and many fundraising materials. Failure to claim these will result in paying unnecessary VAT.
- Made Simple guides: VAT. Sayer Vincent accountants, August 2018, 24pp, PDF: via https://www.sayervincent.co.uk/resources/made-simple-guides/. In my opinion, the best starting point.
- How VAT affects charities. HMRC, VAT notice 701/1: https://www.gov.uk/guidance/how-vat-affects-charities-notice-7011.
- VAT. Charity Tax Group: https://www.charitytaxgroup.org.uk/tax/vat/. Similar to the above but explains more of the background, and includes more examples