VAT free for charity?

[jxm28788]

Just had the following query from a customer -
as we are a charity can we have it free from VAT as we are a disabled organisationAnyone know if there is VAT exemption for charities, and if so how would this be handled in actinic?

[leehack]

This is perfectly feasible if they are not vat registered. If they are, then they tend to just pay the VAT and claim it back. Ask for their registered charity number and log it against the transaction for your records. If it is a very large amount and you are concerned then clarify with your accountant, but in general what they say is true and acceptable. You could also check their delivery address against the registered charity number if applicable.

[jxm28788]

so in actinic I would just let them place the order, then manually adjust it, and refund VAT to their card...?

[leehack]

They can exempt themselves during the actual checkout process if you have that facility enabled on your tax tab, they are selecting it then, rather than you doing it for them. Personally, i would always want them doing this, onus is then on them and far less messy IMO.

[jxm28788]

So how does that work in practice? I would imagine that I would get more problems through cheeky customers exempting themselves from vat when they have no right to do so than with the occassional charity order...

[Mike Hughes]

I had a quick look around and it doesn't seem that straightforward. If i were you I'd go and look at the details on the HMRC website.

Here are some example statements. I can't say if these are definitive or not.
In addition, there are some special reliefs available for charities which mean you don't have to pay VAT on certain goods and services you buy - whether or not you're registered for VAT. You have to provide your supplier with an eligibility declaration that certifies that all the necessary conditions have been met, otherwise you'll have to pay the VAT.



Purchase reliefs for charities
If you're a charity, you may be able to buy the following goods and services without paying VAT. The goods or services may have to meet certain conditions, and there may be restrictions on what you can do with them - and in addition, only certain types of organisation may qualify.

Most of these VAT reliefs are not available to subsidiary trading companies, only to charities themselves.

advertising and goods associated with collection donations
aids for the disabled
construction
drugs and chemicals
energy-saving materials
equipment for producing talking books and newspapers
lifeboats and certain associated goods and services
medical and scientific equipment
medicinal products
resuscitation training models


From the sound of it, only some products and services can be VAT exempt and the charity needs to complete a detailed declaration that they qualify.

Mike

[leehack]

Well some people will try it on until they see they have to provide an exemption number and then forget about it. Some will go through the whole process i guess, keep your eyes out just as you do for fraud. Or switch it back off after they've done the transaction if you are worried at all.

[leehack]

IME, their charity number, their address and a copy of their correspondence is more than enough to satisfy the VAT man.

[Duncan Rounding]

This is where I think the system is wrong. Everyone should pay VAT. If you're registered for VAT and are exempt from (some) VAT then you should be registered for VAT and then claim back the appropriate amounts. Charities that are exempt should pay and claim back like other VAT registered companies. This way there would be no confusion. The only exception should be selling to other countries outside the EU etc.

[jxm28788]

This is where I think the system is wrong. Everyone should pay VAT. If you're registered for VAT and are exempt from (some) VAT then you should be registered for VAT and then claim back the appropriate amounts. Charities that are exempt should pay and claim back like other VAT registered companies. This way there would be no confusion. The only exception should be selling to other countries outside the EU etc.
Now you're just talking common sense, you'd never get a government job with an attitude like that... ;)

[leehack]

I like the idea and it seems logical, but in the world of VAT and claiming back, it is just not feasible. Cashflow is important to some organisations and the VAT office dealing with single claim backs when the VAT return sending in that particular VAT amount, will probably not have been done, is just not gonna happen. You can't have VAT offices returning VAT they've not had!

Retailer sits on money that is not theirs or the VAT man's, never going to happen.

[Mike Hughes]

There are more details here including a better breakdown of which goods and services can be zero rated for charities.

http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageExcise_ShowContent&id=HMCE_CL_000097&propertyType=document#P70_8590

It seems to be pretty much along the lines I quoted earlier.

1. Only certain goods and services can be zero rated for charities.
2. The charity has to complete a declaration.

Mike

[Mark H]

We had a similar enquiry recently (disabled group, but not a charity), I phoned the HMRC VAT helpline. It turned out that this particular group weren't eligible although they had said that they were. Also, it was legally our responsiblity to check (which we did) and had we sold VAT free as rerquested we would have had to pay the VAT if the matter subsequently came to light. I would phone the helpline - they are very good, and the quickest way of getting an answer. Get a case reference number from them in case anything is queried in the future.

[Duncan Rounding]

...Also, it was legally our responsiblity to check (which we did) and had we sold VAT free as rerquested we would have had to pay the VAT if the matter subsequently came to light. ...

All the more reason why they should be charged VAT and it should be up to them to claim it back. The onus would then be on them, as it should be, to prove eligibility.

[RuralWeb]

Just another opportunity for scam merchants IMO.

[printerbase]

The only time you shouldn't charge VAT on your goods if you are VAT registered and selling to somebody in the UK is if they give you a VAT exemption certificate.

[guccij]

We have one product which qualifies for zero-rating VAT, but it can only be sold as such if it's going to an INDIVIDUAL, not a charity or company, or the NHS. We had to get it approved by HMRC which took about 2 months but worth it.

The end-user has to sign a declaration saying they are entitled not to have to pay VAT on the product by reason of disability,and we have to keep that declaration with our VAT records.

It sounds to me as if this "disabled charity" is trying it on big time.

What we do in Actinic, is process the NHS/other orders offline so we can add in the VAT for them.

[Mark H]

http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageLibrary_PublicNoticesAndInfoSheets&propertyType=document&columns=1&id=HMCE_CL_000184#P53_4013

Particularly 2.3 and 3.3