For most not for profit entities, VAT is an added cost that needs be considered in respect of any spend plans, particularly when the spending is on a capital item. It is therefore great news if VAT can be avoided on the purchase of either goods or services.
Happily, there are a several reliefs from standard rated VAT that a not-for-profit entity may be able to use when incurring expenditure examples of which are set out below:
Commercial buildings converted to residential use
The VAT liability of converting a building previously used for commercial purposes into a relevant residential purpose building is reduced rated (currently at 5%).
Relevant residential purposes includes a home or accommodation for children/students, personal care homes and hospices.
Where a building is intended to be used solely for non-business/charitable purposes, as a village hall or for relevant residential purposes, its construction can be zero-rated subject to certain criteria being met.
A charity is able to receive zero rated advertising, including a newspaper or television. The relief covers all types of advertisements on any subject. There is no requirement for the name or logo of the charity to be included for relief to be allowed. Charities are however, expected to only place advertisements which are in line with their charitable objectives.
Fuel and power
VAT at the reduced rate on fuel and power is available to charities when it is used for non-business purposes. It can also pay reduced rate VAT on maintaining equipment connected with the supply.
The relief applies to both VAT registered and non-registered charities, providing their charitable status is recognised by HMRC. There are certain rules on the apportionment of fuel and power used for non-business and business activities and whether relief can apply to the entire supply.
Items to be used by disabled people
Where a charity supplies certain types of goods to a disabled person for their personal or domestic uses, it is possible, in certain circumstances, for the supply of those goods to the charity to be made on a VAT free basis.2394
Burgis & Bullock have extensive experience in the not for profit sector. Should you wish to discuss any of the above matters with a specialist, please contact our Head of VAT Services, Gill Yates on 0845 177 5500 or contact us on-line.