VAT mess not charging VAT to charities

carlsagen

Hi,

I run a small 'start up' company who has been dealing with a charity. We had been told by the charity that because they had 'charity status' we needed to invoice with zero VAT. Naively we took this on face value without research.

Since then they have had a VAT inspection. The inspector found that we had not been charging VAT and that he would deal with it. I got this info from the FD at the Charity.

I then proceeded to do some digging and realised that zero vat is only applicable to certain products and to certain types of charity... To my horror.

I have since spoken to the Charity who has washed there hands of it. I obviously don't want to lose this customer but i also can't afford to take such a significant 'hit' to the business which is likely put us under.

My accountant has recommended that we produce a VAT only invoice for the missing vat but with it being a significant amount and the charity already having washed there hands of it, i really don't know what to do so i'm seeking some advice on whats best to do and who is liable.

Thanks

carlsagen

just dawned on me that they wouldn't have a VAT inspection if they aren't VAT registered?

phill99

Take your accountants advice. If they purchased goods or services from another company who didn't take their advice and subsequently charged the VAT cortectly, the charity would still be liable and would have to pay.

This still applies to you. So they are still liable for the VAT.

Just because they are a good customer doesn't mean they can get away with it, charity or not!

You aren't a charity. You are in business. So you need to act like a business.

Mistral001

Take your accountant's advice. You should report that charity to the Charity Commission as effectively they asked you to commit VAT fraud as far as I can see.


PS. If you have to pay VAT on the goods without this charity paying anything more, you could save some money by only charging VAT on 83.33% of the price which means that if you charged them orininally £1000 then the VAT price would be £833.33 +166.67 [EMAIL="VAT@20%"]VAT@20%[/EMAIL] =£1000.

Haarlem

What goods or services were you supplying?

Savvy_Sue

carlsagen wrote: »

just dawned on me that they wouldn't have a VAT inspection if they aren't VAT registered?

But possibly they should have been ... depends on their activities / turnover etc.

antonic

carlsagen wrote: »

Hi,

I run a small 'start up' company who has been dealing with a charity. We had been told by the charity that because they had 'charity status' we needed to invoice with zero VAT. Naively we took this on face value without research.

Since then they have had a VAT inspection. The inspector found that we had not been charging VAT and that he would deal with it. I got this info from the FD at the Charity.

I then proceeded to do some digging and realised that zero vat is only applicable to certain products and to certain types of charity... To my horror.

I have since spoken to the Charity who has washed there hands of it. I obviously don't want to lose this customer but i also can't afford to take such a significant 'hit' to the business which is likely put us under.

My accountant has recommended that we produce a VAT only invoice for the missing vat but with it being a significant amount and the charity already having washed there hands of it, i really don't know what to do so i'm seeking some advice on whats best to do and who is liable.

Thanks

If you have incorrectly invoiced the Charity by not charging VAT, then you an produce a fresh invoice (including the VAT) and ask that they pay it - BUT they are NOT obliged to pay it.

If this happens then you are left with a debt that needs to be paid.

At this point do not panic, contact the Officer who will (or has) raised the Officers Assessment to advise that you cannot pay in full and will need a time to pay arrangement to repay what is owing.

They should then refer you to the Debt Management Unit in HMRC, who will then discuss with you your request.
Try to make a payment when you make the request, as in my experience HMRC will take this as a sign of goodwill that you want to resolve this.

If you come to an arrangement stick to it ! and keep your current liabilities up to date.

Remember, just because you have a debt, it doesnt mean its the end of the world !.

Hope this helps.

zaax

Very little is VAT exempt. You always charge VAT (some goods are at zero rate but that might change) its down to the buying company to claim it back.

martindow

It looks as if most charities need to register if their turnover if above £82k like anyone else and should provide you with a certificate confirming they are eligible for VAT relief (if HMRC has agreed to it).

https://www.gov.uk/vat-charities/overview

I assume that charity accounts are public documents and you can see their turnover. If you find they are incorrectly operating and should be registered or didn't use the correct procedures, they may be very keen to settle your missing VAT and hope you don't drop them in it.

JasonLVC

If the relationship with customer is ending, then issue the invoice and then take them to court and get a CCJ against them for non-payment.


Not very nice, but then, neither are they.

[Deleted User]

carlsagen wrote: »

Hi,

I run a small 'start up' company who has been dealing with a charity. We had been told by the charity that because they had 'charity status' we needed to invoice with zero VAT. Naively we took this on face value without research.

Since then they have had a VAT inspection. The inspector found that we had not been charging VAT and that he would deal with it. I got this info from the FD at the Charity.

I then proceeded to do some digging and realised that zero vat is only applicable to certain products and to certain types of charity... To my horror.

I have since spoken to the Charity who has washed there hands of it. I obviously don't want to lose this customer but i also can't afford to take such a significant 'hit' to the business which is likely put us under.

My accountant has recommended that we produce a VAT only invoice for the missing vat but with it being a significant amount and the charity already having washed there hands of it, i really don't know what to do so i'm seeking some advice on whats best to do and who is liable.

Thanks

You/your company is liable to HMRC for the VAT owed, even if you've not yet received it yourself, let alone actually billed anyone for it yet.

Take the advice of your accountant ... or get a new one if he fails to explain things to you properly or you don't trust the advice when he does give it.