CIC - apply to be VAT registered

Discussion in 'Accounts & Finance' started by Sobie, Oct 11, 2020.

  1. Sobie

    Sobie UKBF Regular Free Member

    331 50
    Hi All,

    In my spare time :)rolleyes:) I volunteer for our local in bloom group. The group have recently become a CIC company, enabling them to apply for larger grants. I've agreed to be a director.

    What we do is take neglected council owned green spaces, get a licence to plant from the council, then we get donations from public and spend all the donations on plants and materials to make the site look good.

    The idea with being a CIC is to start being able to apply for much larger grants, for instance I've just submitted one for £15,000 which will be spend on adding new planters to our retail areas (which the council won't fund). We will then get sponsorship for each planter to pay for its maintenance (watering new plants etc).

    Although our threshold won't ever be close to VAT registration I'm wondering if we would be wise to register. For instance on the project above all of the goods purchased will be subject to VAT which the group could reclaim, effectively giving the group 20% additional funds to spend.

    From what I understand donations are exempt from VAT, Grants depends on the small print, and sponsorship would be 20%. Although, many of the businesses that would be our sponsors would probably be VAT registered so would like to claim back the VAT themselves.

    Please can I have your thoughts.
     
    Posted: Oct 11, 2020 By: Sobie Member since: Jul 27, 2008
    #1
  2. Scalloway

    Scalloway UKBF Legend Free Member

    16,477 3,486
    The first point to consider is do you malke taxable supplies? ie does the CIC send out bills or have cash sales. You need to be dooing this before you can register for VAT.

    The next point is will the VAT you are charged relate to VATable supplies? You can only reclaim VAT VAT you pay if it does.

    So only if you charge an entry fee for the green space or rent it out with VAT added to the rental will you be able to register.
     
    Posted: Oct 11, 2020 By: Scalloway Member since: Jun 6, 2010
    #2
  3. Sobie

    Sobie UKBF Regular Free Member

    331 50
    We send out invoices for sponsorship.

    we don't currently have any cash sales, although we may add this soon to raise funds. (as an example we may sell surplus plants)

    Not sure what you mean by point two. We would only reclaim VAT if we have been invoiced for it.
     
    Posted: Oct 11, 2020 By: Sobie Member since: Jul 27, 2008
    #3
  4. Scalloway

    Scalloway UKBF Legend Free Member

    16,477 3,486
    VAT and sponsorship

    https://www.gov.uk/guidance/sponsorship-and-vat-notice-70141

    For example you bill a business to sponsor a planter and put their name on it. You can reclaim the VAT you are charged for the planter and its instalation.

    Another business makes you a general donation and you use the money to buy another planter. You can't reclaim the VAT you are charged for the planter and its instalation as you haven't made a VATable supply.
     
    Posted: Oct 11, 2020 By: Scalloway Member since: Jun 6, 2010
    #4