Charity VAT & Gift Aid Taxation

VAT is an all encompassing tax. It affects businesses, charities and non-profit making organisations alike. If your taxable income exceeds the registration limits you are required to register even if you are a charity and do not normally pay tax! In fact, the variety and nature of charities’ income streams means that VAT compliance is harder for charities.

Even if you don’t need to register for VAT, we can advise you of the VAT exemptions available to charities so that you don’t incur the VAT in the first place.

Why Plummer Parsons?

Our specialist charity tax team can advise you on your VAT obligations. We have experience of advising a variety of charities, both large and small, as well as local community groups and Community Interest Companies (CICs). We take the time to understand your charity and its activities and have the experience to make a difference.

To most charities VAT is just another cost which can not be recovered but we can advise you how to plan for VAT and keep irrecoverable VAT to a minimum. Through simple, practical solutions we can save your charity money.

The services we can offer include:

  • Assistance on VAT registration;
  • Help with completing your VAT returns;
  • Setting up your accounting systems to simplify the partial exemption calculation;
  • Review of your partial exemption VAT recovery methods;
  • VAT planning for new projects;
  • VAT healthchecks to identify problem areas;
  • Advice on specific charity VAT exemptions available (Fundraising, equipment purchases);
  • Advice on general VAT exemptions applicable to common charity income streams;
  • Structuring of your activities through a trading subsidiary to maximise VAT recovery;
  • Group VAT registration;
  • VAT Planning for land and property transactions (Options to Tax, purchases, sales and new builds);
  • Charity mergers - VAT planning and Transfers of a Going Concern (TOGC);
  • VAT planning for sponsorship events

Gift Aid and Charity taxation

As well as VAT, our specialist charity tax team can assist with all tax issues related to charities.

Under normal circumstances charity surpluses are exempt from tax. However, where expenditure is not for charitable purposes or where trading income is substantial, a tax charge can arise.

Gift Aid is a valuable source of extra income for charities. This is likely to become even more important with the recent announcement that from April 2013 charities will be able to claim Gift Aid on up to £5000 of small donations without the need for Gift Aid declarations. However, until then tax already claimed could be repayable if the donor receives a benefit from your charity or your Gift Aid records are inadequate.

Sponsorship income is becoming more popular for charities but there are hidden tax traps that need to be considered when running sponsorship events or obtaining sponsorship from businesses. We can advise you how to avoid these potential pitfalls and avoid an unwelcome tax bill!

Our services include:

  • Assistance with registering for Gift Aid and making tax claims;
  • Improving your charity’s tax recovery on its Gift Aid donations;
  • Compliance checks to ensure your Gift Aid documentation is adequate;
  • Ensuring you Gift Aid claims do not fall foul of the benefit rules to donors;
  • Advice and assistance with Gift Aid tax visits by HM Revenue & Customs;
  • How to repair Gift Aid documentation following such visits;
  • Healthchecks on your charity’s expenditure to identify potential problems;
  • Reviewing your trading income levels against the charity trading exemptions;
  • Use of trading subsidiaries to maximise trading income and save tax;
  • How to finance trading subsidiaries and still Gift Aid the profits to your charity;
  • Advice on allocating costs to trading subsidiaries;
  • Help with calculating the Gift Aid payment from the trading subsidiary;
  • The timing of Gift Aid payments by the trading company;
  • Structuring sponsorship agreements to claim Gift Aid;
  • Claiming Gift Aid on the sale of secondhand goods and charity auctions

In addition, our payroll team can help with your PAYE compliance and the charity’s filing obligations.

For more specialist information about Charity tax and VAT please contact Steve Smith, Client Manager in our Eastbourne office on 01323 431200 or steve.smith@plummer-parsons.co.uk.

Community Amateur Sports Clubs

Although not charities in themselves, such clubs can benefit from Gift Aid advice on how to maximise their income (together with other financial benefits). Follow the link for advice from our specialist CASC team on registering as a CASC, the tax benefits and how you can claim tax back on your Gift Aid donations.

Useful links

If you found this information useful, these other resources may be of interest to you: