Not for Profit

Outside of the public sector, the “not for profit” sector covers both charities and other bodies which operate on a not for profit basis. If you operate in this sector you’re likely to face many complex VAT decisions, quite possibly without in-house specialist tax expertise. We’re here to offer you a helping hand.

What are the issues?

To give just a flavour of some of the issues for the not for profit sector:

  • Business or non business – This is perhaps the most complex area, littered with case law in the UK and European courts. It’s critical to understand how a charity’s aims interact with HMRC’s views of business vs non business activity.
  • VAT liability of income– The status of a body as a charity or other not for profit body affects the liability of certain supplies such as sporting services, cultural services and education to name but a few.
  • VAT liability of costs – Although there is no blanket exemption from VAT for charities, there are certain reliefs available on costs such as property, advertising, fuel and power and aids for the disabled. We can help ensure you meet the conditions attached to these reliefs by planning any expenditure ahead of time.
  • What are the costs used for – This affects how much VAT can be recovered and in some cases, particularly property, whether it should be incurred at all?
  • Trading companies – How does use of a trading company affect the VAT analysis and how are charges to / from the trading company dealt with?

How can we help?

The following examples illustrate how we can help not for profit bodies navigate the VAT minefield:

  • Construction projects – taking advice at an early stage can help you manage the VAT cost to take maximum advantage of reliefs on construction costs and to maximise recovery of any VAT incurred via your partial exemption method and the capital goods scheme (a special scheme for recovery of VAT on building costs).
  • Partial exemption reviews – could you benefit from higher VAT recovery by using a special partial exemption method or an override to better reflect actual useage?
  • Liability reviews – does any of your income qualify for exemption or could it? For example Jonathan and Alison have helped a major cultural body achieve exemption for two income streams which HMRC regarded as liable to VAT.

We provide simple, clear and practical advice for our clients to enable them to apply a structured approach to the VAT issues that can arise from their activities.

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