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Advice Hub

Our expert VAT consultants are always looking for ways to improve the training and advice they give. This advice hub is packed with the latest articles and news about VAT, hints and tips for accountants and businesses, blogs, infographics and all kinds of other useful content about VAT.

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What Charities Should Know About VAT Planning

For charities in the UK, VAT treatment often differs from other organisations due to the mix of non-business, exempt, zero-rated, and taxable activities they carry out. A frequent misunderstanding is that charitable status removes VAT obligations altogether, when in practice, charities remain subject to VAT rules in many areas. The way income is generated, how costs are incurred, and how activities are structured all influence the amount of VAT that can be recovered and reported to HMRC.

Exempt Supplies and the Effect on Input VAT Recovery

For many charities and not-for-profit organisations, understanding what Value Added Tax (VAT) they’re expected to pay can be confusing. A common misconception is that charities are automatically exempt from VAT. In reality, the VAT system applies to charities just as it does to commercial businesses, but with a unique set of rules, zero-ratings, and exemptions that can create confusion.

Business and Non-Business Income Received By Charities

While VAT applies to taxable activities undertaken by charities in much the same way as for businesses whose purpose is to generate profit, there are a number of specific considerations for charitable organisations. Activities undertaken should also be identified as whether being done for a business or non-business purpose, as this will have an impact from a VAT perspective.

Charities - Available VAT Reliefs on Purchases

Certain purchases made by registered charities become liable to the zero or reduced-rate, whereas when purchased by a business, these would often be liable to the standard rate, however, the VAT reliefs charities can claim are limited in scope. This guide outlines the main areas where these reliefs are available, helping you understand how VAT applies to your organisation can help reduce costs and improve compliance.

VAT Opportunities for Charities

HMRC are not very charitable when it comes to charities and take the same stance with regards to VAT accounting errors as they do with any other entity. This was demonstrated in a recent HMRC campaign aimed at identifying small charities with a turnover of less than £1,000,000 that had incorrectly recovered input VAT on relevant costs.