Do Charities Pay VAT?

Beanynut2

Hi

Please could anyone tell me whether registered charities need to pay VAT? We were recently awarded £6000 to carry out a feasibility study for refurbishing or rebuilding on one of our community sites, which we commissioned a local architect to undertake.

Unfortunately, we've received his invoice for £6000 +vat, and we don't have the vat amount; however, I remember reading somewhere that registered charities are VAT exempt - I'd be grateful if someone would be tell me if this is true?? It would certainly relieve a lot of worry!!!

thanks
Jill

fengirl_2

No, charities are not exempt from VAT - apart from certain items such as job advertising and fundraising literature. You need to factor VAT in to all your budgets.

JasonLVC

As per fengirls' post, charities have very few 'exemptions'. The majority of them relate to the construction of property but the exemption does not extend to professional fees or consultancy services such as in your case.

Grants and lottery funding is ALWAYS paid without any factoring for VAT - so if your poject progressess and you seek more funding, do make sure you seek advice regarding the VAT status of the project before applying for grant funds becuase that way, if you the project is going to incur VAT, then you can factor that in on your new grant request.

Sorry to hear about the lack of funds, I come across this situation all the time and there's just nothing you can do about it.

Savvy_Sue

What they both said. Always watch out for additional charges. As it happens, last night I went with DH to a property auction: his charity is considering moving premises and were potentially interested in one of the properties up for sale, although hoping it wouldn't reach its reserve (it didn't) because they are not yet satisfied it is the 'right' property. However, in case they ended up trying to buy this or any other property at auction, it seemed like a good idea to go and see what happens before attempting to do it for real.

Now DH is usually pretty good at investigating things, but he was shocked to discover the list of additional charges they would have to pay - what they bid, obviously, but also a percentage for the buyer's fee, another sum for half the seller's legal fees, and I don't know what else, all with VAT on top. He did a rough calculation and made it an additional £32,000 ON TOP OF what they were prepared to bid, which may affect how much they'd be prepared to bid if it comes to it in the future.

Anyway, although I think you have your answer, I'm going to move your post:

MOVING THREADS FOR BETTER RESPONSES

Hi, Martin’s asked me to post this in these circumstances: I’ve asked Board Guides to move threads if they’ll receive a better response elsewhere(please see this rule) so this post/thread has been moved to the Small Biz & Charity Organisers board, where it should get more replies. If you have any questions about this policy please email [EMAIL="abuse@moneysavingexpert.com"]abuse@moneysavingexpert.com[/EMAIL].

If you're new to the world of being involved on the business side of a charity, you may well find some useful sticky threads there.

markandkate

If some or all of the work is for disabled people then this is zero rated. A reminder to all charities that you should only be paying 5% VAT on your gas and electricity It will not happen automatically so do check

fengirl_2

Have to disagree with Jason - the Lottery does pay unreclaimable VAT - they need to ensure that the project can be completed, so no point in leaving grantholders short. When I worked for the Lottery we unfortunately funded a large village hall were no one had noticed thet VAT hadnt been included and the whole thing was a diwsaster. Makes one wonder why no one noticed that the Olympics were going to incur VAT until it was too late!

Beanynut2

Thank you all for your advice, even though it wasn't what I'd hoped - funding and VAT seem like a nightmare, but once bitten twice shy - we'll definately won't forget it again.

thanks
Jill

Topdogfran

If you've been charged VAT on the invoice, you should pay it surely?

We do a lot of work with charities, and by the nature of our business, part of the cost is invoiced from us (and has VAT added) and sometimes the balance is paid directly to the SE 'sub contractor' - no VAT. The number of clients who pay our invoices having deducted the VAT is frustrating! Or, as today, pay us the total amount, minus VAT, despite having been invoiced by us and told to pay the subcontractor direct. If we receive the money, we have to pay VAT on it, which means reinvoicing so the client then has to pay the balance.

dzug1

fengirl wrote: »

Have to disagree with Jason - the Lottery does pay unreclaimable VAT - they need to ensure that the project can be completed, so no point in leaving grantholders short. When I worked for the Lottery we unfortunately funded a large village hall were no one had noticed thet VAT hadnt been included and the whole thing was a diwsaster. Makes one wonder why no one noticed that the Olympics were going to incur VAT until it was too late!

Don't think that's what was being said. Yes the lottery WILL pay VAT - but only if it's been included in the original grant request. they won't pay it as an extra.

discountmummy

Advertising for charities is VAT exempt, just let the advertiser know and when they invoice they will show the VAT as exempt