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Cait

Charity and VAT

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Hi, does anyone out there know about a registered charity being able to claim back, or not pay VAT? We are looking to buy a new easel and it's been suggested to us, by the organisation who is donating the finances for the purchase, that as a charity we are exempt from VAT. Could anyone shed some light on this? Is it correct, and if so, how do we go about it?

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to my knowledge you would need to be VAT registered to do this. If you are taking less than about 150k per year then the time and money that costs is probably not worth it........unless all your children pay. You are not automatically exempt from vat as a charity. Schools are however.

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We looked into VAT earlier this year and it seems preschools can't be VAT registered

 

https://www.gov.uk/guidance/vat-exemption-and-partial-exemption

 

 

There are some goods and services on which VAT is not charged, including:

  • ...
  • education and training
  • fund raising events by charities
  • ...

These items are exempt from VAT so are not taxable. ....

If you only sell or otherwise supply goods or services that are exempt from VAT then yours is an exempt business and:

  • you cannot register for VAT
  • you cannot recover any VAT you incur on your purchases or expenses

 

So if you offer services that don't count as education and training, you may be able to register for VAT on the services that don't count as education and training, and therefore may be able to recover the VAT for the easel.

 

We ended up with a 20% bigger bill than we expected for having hot meals provided by the schools' catering service as we never had a contract so didn't realise we would have to pay VAT - so never charged parents VAT...

 

Schools seem to fall into a different category in that their LEA can reclaim the VAT on their behalf: https://www.gov.uk/government/publications/vat-notice-70130-education-and-vocational-training/vat-notice-70130-education-and-vocational-training

 

 

The LA can recover the VAT only if the school opts to donate the money to the local authority and the latter buys the goods and services itself. The LA must meet the conditions set out in Notice 749 VAT: Local authorities and similar bodies . In other words, the LA must:

Step Action 1 Place the order 2 Make the purchase itself 3 Receive the supply 4 Receive a tax invoice addressed to it 5 Make payment 6 Use the goods and services for the educational purposes of the school 7 Retain ownership and adequate records

This route is not available to:

  • foundation schools - with regard to certain direct grants they receive from the Department for Education (DfE) for construction services; or
  • voluntary aided schools - with regard to income, including direct grants from the DfE, used to fund works that are the responsibility of the governors (see paragraph 15.7)

 

Dunno what happens to Academies - cynical me thinks they can't get VAT exemption and that's why the Gov't wants all schools to become them...

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Interesting thought!

 

Thanks both x

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