CH: Can a PTA or school recover VAT on purchases?

koru

My local school is about to purchase 15 new computer monitors. They will probably be funded by the PTA, which I assume is a charity. Does anyone know if it can recover the VAT on the monitors? Or can the school recover it (if the PTA donated the money so the school could buy them)?

Bossyboots

We used to get the school to buy equipment and invoice us for the cost minus the VAT as the PTA needs to be VAT registered itself to claim it back.

koru

Bossyboots wrote:

We used to get the school to buy equipment and invoice us for the cost minus the VAT as the PTA needs to be VAT registered itself to claim it back.

Thanks. Do you know how the school does that? Is their invoice zero rated maybe? So, they can reclaim the VAT, but they don't have to charge VAT to the PTA?

Bossyboots

koru wrote:

Thanks. Do you know how the school does that? Is their invoice zero rated maybe? So, they can reclaim the VAT, but they don't have to charge VAT to the PTA?

We had a standard invoice agreed between us that was on school headed paper and it would state something like "In accordance with the agreement made at the meeting of (association name) and recorded at paragraph (whatever) in the minutes of that meeting, please pay the sum of £......... to (insert school name) in settlement of the sums agreed to be paid.

Our meetings would agree to meet a specific figure towards the purchase of items, rather than saying we would pay for x amount of whatever. It just so happened that these figures were the net cost. We would be given estimates or fixed prices at the meetings and agree what we would pay towards it. If in the meantime there had been a slight price increase the staff could come back to another meeting and ask for the extra.

The invoice to us was irrelevant to the school itself as on their books it just showed as a contribution from the PTA but it kept our books square.

koru

Thanks, but did the school reclaim the VAT they paid? If not, then under your arrangement, the school paid the VAT and the PTA paid the rest. I'm hoping to find a way that one of them can get the VAT back.

Bossyboots

koru wrote:

Thanks, but did the school reclaim the VAT they paid? If not, then under your arrangement, the school paid the VAT and the PTA paid the rest. I'm hoping to find a way that one of them can get the VAT back.

Yes the school reclaimed the VAT. The school had a budget item for income from donations. They would pay for things like computers from the IT budget and process our money through the donations ledger, transferring the donated sum back to the IT budget, having claimed the VAT back from the invoices which were addressed to the school, not the PTA. That is very important. They then sent us the request for refund of the agreed sums so that we had evidence on our books of where the money had gone.

koru

Altarf wrote:

This is a viciously complex area of VAT law, and depends upon other things on the 'status' of the school. Assuming that this is not a private school, then you should have a look at VAT Notice 749, in particular sections 7.3 and section 7.4 (but don't blame me when you get a headache).

http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageLibrary_PublicNoticesAndInfoSheets&propertyType=document&columns=1&id=HMCE_CL_000179

Thanks. That really helps. Looks fairly likely the school can claim the VAT back, which ties in with what Bossyboots says.

Dustykitten

I know this thread is old but rather than start a new one I thought I'd ask here.

My PTA/school work in the same way as boosyboots described above and it has been fine.

A treasurer at another school contacted me to say that our county council were not happy about there school doing this for some very odd reason and that the PTA should be paying the VAT (even though they can't claim it back). They said that when the school 'invoiced' the PTA for the item they should be charging the PTA VAT. Has anybody else heard of this?

Our school do not actually invoice us. We agree an amount in a meeting and then the school simply give us a copy of the invoice for our records and we make a donation to them.

I beleive it is important for schools to purchase equipment as it is then covered by the schools insurance and also they have the warrenty/guarantee as they have the contract with the supplier.

Savvy_Sue

Personally I think you'd get round this by not being given a copy of the invoice, but by following Bossyboots system: you agree what you're going to give the school, and give it to them, they write and say thank you we're spending it on computers or whatever.

In my PTA days, someone asked if we could get the school to buy items for use by the out of school club to avoid paying VAT. Both the finance officer and I said no, as we did to the suggestion that the school buy items for sale at fundraising events. But I agree, the school should buy things the school needs, then the contract / warranty / guarantee are with the school.

lavendergirl

Not sure that you can recover VAT on purchases. I know that when I was secretary of our local PTA we had to register as a charity because we raised over £1,000 p.a.

However from the Charity Commission website:
Registering a Charity

Comprehensive information on registering a new charity, including all the publications and forms you will need before you apply

Please note. If you are thinking about registering a charity from 23 April 2007 it will only have to be registered if its annual income is over £5,000. It is not our policy to register charities that do not meet this minimum requirement. Suggest you visit the Charity Commission website for info:

http://www.charity-commission.gov.uk/

Hope this helps, though you are not automatically a charity without registering in any event, but see info above for minimum limits before registration is compulsory

JasonLVC

The advice is right. The PTA receives donations which it then passes over to the School to make purchases with.

To recover VAT, you must be VAT registered and be making taxable supplies (that is selling services/goods with VAT on).

Education is generally exempt from VAT so no VAT is charged and No VAT is recovered.

The sale of a computer, if the seller is VAT registered, would be standard rated (17.5%) regardless of whom it is being sold to. So if the school is selling a computer to the PTA it would have VAT on.

Schools which are raising invoices with no VAT on are at risk of assessment from HMRC.

Remember that a donation has to be freely given, if funds are given in exchange for goods or services then it is no longer a donation, even if profit is not a motive.