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Do I register for VAT
Comments
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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!
Get a new accountant!!!
The advice you have been given is correct.
A new accountant will explain how to operate the VAT system"Now to trolling as a concept. .... Personally, I've always found it a little sad that people choose to spend such a large proportion of their lives in this way but they do, and we have to deal with it." - MSE Forum Manager 6th July 20100 -
Im pretty sure disabilty related services would usually be VAT exempt so you would charge a zero rated invoice.
I could be wrong though and it could only apply to selling vehicles for disability.0 -
Why dont you contact the voluntary action group who covers your town/city? They will be able to advise you.
I think its about the type of prduct or service that is vat exempt rather than the type of business or organisation you are.0 -
I know that whilst operating as for-profit, you would need to register for VAT, however with charities (and I’m a trustee on c.30), it’s a mix of what is ‘trading income’, what is ‘non-trading income’ and what is ‘exempt income’, and this is something that without looking through your books in thorough detail, I wouldn’t be able to advise.
Charities are rather a specialist area for VAT, and I am not an accountant, so it would be worth consulting someone that is. I’d hazard a guess, but won’t give my answer either way for this reason.
CK💙💛 💔0 -
Try the Independent Examiners for advice. I have no connection other than valuing their advice: they do a monthly bulletin which is very helpful and worth signing up for!
I guess another group worth contacting could be Working on Wheels. They'd probably know whether what you offer is liable to VAT.Signature removed for peace of mind0 -
Or you might try the Community Transport Association at http://www.ctauk.org/. In fact, you might consider joining the CTA.0
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Mistral001 wrote: »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).
You can be a fully qualified accountant and never have worked a day in accounts in your life.
The problem here is
1. The seeming unwillingness of the accoutnants to find out exactly what the tax status is, surely they must have asked at the begining. How much do you expect to turnover etc etc to see if you expect to hit the threshold.
2. The structure of the company is niche so this is where the difficulty will be in obtaining the correct treatment for tax purposes.0 -
It's not whether they are chartered or not. it's a common missconception that being chartered means you are somehow a good accountant.
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It is a misconception usally promoted by those who have not sat the accountancy examination perhaps. But then again you might be correct and if we applied it to everything we would get far better doctors if they did not do all that studying to become qualified and aeroplanes would be safer if the engineers who inspected them did not get qualifications etc. etc.0 -
@Interritus seems to have got the heart of it. First establish that "payments from Social Services for care" are zero-rated. If so, register for VAT and everything will fall into place. If not then you have a problem.
"The state" (if you will accept the term) wants you to be able to run your CIC successfully as you are doing and so remove from itself the burden of direct provision of the service you provide. There should be a mechanism to enable you to get the tax-treatment the state wants you to have.0 -
Hello
Im an ACCA accountant that works for a Local Authority in Social Services Finance- hopefully that ticks all the boxes! I'll be brief....
1) You do need to register for VAT as you are over the VAT threshold (currently £73k per annum)
2) Google "welfare vat hmrc" for a link to the HMRC VAT advice page re. Social Care Service Provision (have a scan through but imho you dont qualify for zero-rated VAT). Its called "notice 701/2" if you get stuck
3) And lastly, but most importantly, you are 100% allowed to charge VAT for your services. Social Services issue direct payment or personal budgets for a individuals to purchase their own care services directly. Even if Social Services departments dont state that they have included a provision in the direct payment for VAT it does not make the individual exempt from having to pay it!!
Without wanting to patronise as I dont know how much you know about VAT, put in its simpliest terms it an indirect tax that is collected on behalf of the government (and they never lose out!). When you register for VAT you'll add (20%) the cost of all invoices. You'll also pay VAT on all purchases. If you charge more VAT than you pay out on VAT then you owe HMRC the difference. If its the other way around (you've paid more VAT than you've added to your charges) then they owe you.
Hope this helps a little0
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