Do I register for VAT

winegums

I hope someone can help me out with this as I phoned the Inland Revenue helpline to ask if I have to register for VAT and they didn't know the answer and suggested I 'google' it!

I help run a Not-For-Profit Community Interest Company. The staff pick up disabled people in company cars and take them to the various activities we run every day. The activities are all training and work experience based. All our clients receive 'Direct Payments' from social services to pay for their care and are referred to us by social services.

We charge clients £10 per hour for a 6 hour day, fully inclusive of transport, care, training, safety equipment and insurance. We have 6 staff who each pick up 2 clients and also 2 part-time office staff and 2 trainees. Staff are paid £9 per hour plus £3.50 per day meal allowance and 32p per mile petrol refund (The £9 per hour is paid as staff are highly experienced and specially trained). Staff work 30 hours per week, Mon-Fri 10am-4pm and receive approx £303.50 per week gross inc allowances. The total wages bill each week including employers NI is approx £2850.

Our total income is £3600 per week
Wages is £2850 per week
We also put aside £650 per week for direct debits, such as car insurance, tax, MOT, office equipment, insurance and mobile phones.

I work in a home office so there are no office overheads.

Total income is £3600 per week
Total expenditure is £3500 per week

The £100 per week balance is used to purchase safety equipment, uniforms, training, etc.

I have now been told that as our income is over the threshold for VAT we should register and start charging VAT. We can't actually charge VAT as our clients receive the payment for their care from Social Services and we can't pass on the VAT to them. We obviously can't take the hit ourselves as we can't afford it. I've had a letter from HMRC saying we are not classed at a charity or charitable status. When I phoned to ask about Corporation Tax and VAT the person on the helpline told me to look it up. I've tried looking it up but can't find anything specific. A local agency similar to ours said they are exempt but I can't rely on their word. We went through the registration with the CQC a few years ago and was told the rules have now changed and we don't need to register as we don't provide 'personal care', so we are not part of any professional organisation.

Any ideas?

Sorry for the long post but our accountant is even unsure and I need clarification from somewhere!

vax2002

£3600 a week and you claim non for profit ?
Who are you trying to kid here ?

winegums

vax2002 wrote: »

£3600 a week and you claim non for profit ?
Who are you trying to kid here ?

I'm not trying to kid anyone. Yes we receive £3600 per week but 'not-for-profit' means that any excess is put back into the company to purchase equipment, etc for our clients. We don't rent expensive offices and only drive small, older cars. I actually work for the company on a voluntary basis and there are lots of volunteers. The whole point of the company is to get disabled people out of daycentres or the confines of their homes and train them in various skills and supply them with work placements.

What do you do?


I'd actually appreciate it if only helpful answers could be posted please.

blinko

Do you not have an accountant who will be able to help you. It sounds a awkward situation, but the bottom line is I know for LTD and sole traders. It doesn't matter whether you are profit making or not once you hit the threshold 70k odd then you have to register.

You will be able to claim and be liable to pay VAT on inputs and outputs

Interritus

Any business entity can register for VAT. If you are over the threshold and not exempt you have to register for VAT.

If the charges you make to your clients are zero rated, you put these on your return.

The wages you pay have nothing to do with VAT.

It will be to your advantage by registering as you can claim back all the VAT paid on business expenses (excluding staff) e.g.fuel, capital equipment etc, which could be quite a lot of money.

winegums

Hi Blinko

Thanks for your answer.

We use the community accountants but they are unsure as there is nothing definitive to our situation.

We are a CIC Limited by Guarantee and when I read the guidelines on the HMRC website some of the points for exemption apply to us but then again some of the points for non-exemption apply as well!

The community accountants are also looking into it for me but they also seem to be going round in circles.

Do you think I should just register and hope they then declare the company as exempt or zero rated?

winegums

Interritus wrote: »

Any business entity can register for VAT. If you are over the threshold and not exempt you have to register for VAT.

If the charges you make to your clients are zero rated, you put these on your return.

The wages you pay have nothing to do with VAT.

It will be to your advantage by registering as you can claim back all the VAT paid on business expenses (excluding staff) e.g.fuel, capital equipment etc, which could be quite a lot of money.

Thanks for your input.

I know the wages aren't anything to do with the VAT situation - it was mearly to clarify where the income was used. I'm a bit nervous about going ahead and registering in case HMRC say we have to charge VAT as we can't pass the cost on to our clients and it would mean us folding.

nikki1520

You may fall under the healthcare or education and vocational training exemptions - you still have to make an application, but it's to be excepted from registration as you are a wholly exempt business. This will only apply in most cases if you are regulated or controlled by the NHS, or the local authority.

The public notices are 701/1 - charities, 701/30 - education, and 701/31 and 701/57 - healthcare

Failing those, yes you do need to register

JimmyTheWig

Could the 6 drivers become self employed in some way?
Then each would be well under the VAT threshold.

Other than that it sounds like you'll have to put the price up to £10+vat.
Do you know that social services will refuse to pay this increase?

Raksha

Confused - why can't you pass the VAT on to your clients? Is it because the increase will mean they will stop using your services?

I used to work for a 'run as a not for profit' company, and we invoiced as any other company would, and completed VAT returns accordingly. Unfortunately, as you had found out, the payment you make for the human part of your service very often doesn't include VAT which you can claim back.

Mistral001

winegums wrote: »

Hi Blinko

Thanks for your answer.

We use the community accountants but they are unsure as there is nothing definitive to our situation.

We are a CIC Limited by Guarantee and when I read the guidelines on the HMRC website some of the points for exemption apply to us but then again some of the points for non-exemption apply as well!

The community accountants are also looking into it for me but they also seem to be going round in circles.

Do you think I should just register and hope they then declare the company as exempt or zero rated?

Are these accountants properly qualified accountants (ie chartered)? If they are not then consider getting advice from ones who are and who perhaps specialise in charities/non-profit concerns. A lot of people seem to depend on you it would appear and thus perhaps you should get the best advice even if it costs more than you are paying at the minute. (BTW I am not an accountant).