Do I register for VAT

Cardinal-Red

I think there is some confusion here in terminology.

There is a massive difference between zero rated and exempt for VAT purposes.

I can't see any way that the services you are providing will be zero rated.

I can see a way they might be exempt, under the provisions for welfare, but even this is in doubt. The exemptions apply to:

- the supply by a charity of welfare services... or
- the supply of transport services for sick or injured persons in vehicles specially designed for that purpose

You say they are company cars - but are they adapted for disabled people? If not, and it's just a standard car, then am afraid I don't see a way into the exemption. (By the way, 32p a mile is in excess of HMRC's allowance for company car mileage and so you may want to consider PAYE implications of this!)

Anyway if all of your services were exempt, then it would be impossible for you to register for VAT. So that would solve that problem.

However, I suspect, sadly, that they won't be. Therefore if you do breach the threshold, you will have to charge VAT. Whether that inconveniences your users, is irrelevant sadly.

Local Authorities can recover VAT charged to them in respect of them providing welfare services so it's not impossible for you to make this situation work to your advantage if you can get a direct invoicing system set up to the LA involved. The net cost to them will then be the same, and better still you will be able to recover VAT on your costs.

As is said before, this is a tricky area but it's worth getting it right. Am sure what you're doing is very good for the community and it would be awful if you got stuck with some of HMRC's automatic penalties for failing to register etc.