subsidiary of charity and VAT

Discussion in 'Accounts & Finance' started by Irene1966, Feb 12, 2020.

  1. Irene1966

    Irene1966 UKBF Newcomer Free Member

    17 0
    I have been approached to manage a subsidiary of a charity, operating a food outlet.
    As such would I have to charge vat on the products I sell to the public.
    Procucts that I will be selling will be hot food.

    Thanks
     
    Posted: Feb 12, 2020 By: Irene1966 Member since: Mar 7, 2016
    #1
  2. kulture

    kulture UKBF Legend Staff Member

    8,020 2,202
    Why not ask the charity? I would have thought that all accounting etc will be done by the charity.
     
    Posted: Feb 12, 2020 By: kulture Member since: Aug 11, 2007
    #2
  3. Mr D

    Mr D UKBF Legend Free Member

    19,085 2,211
    First find out if VAT registered.
    If not VAT registered then its a moot point, you don't charge it.

    If it is VAT registered or you have to become VAT registered then you charge the VAT as required. Same as any other food outlet.
     
    Posted: Feb 12, 2020 By: Mr D Member since: Feb 12, 2017
    #3
  4. Irene1966

    Irene1966 UKBF Newcomer Free Member

    17 0
    I will do but Im just trying to put a forcast together before I meet with them so am just a trying to find out.
     
    Posted: Feb 12, 2020 By: Irene1966 Member since: Mar 7, 2016
    #4
  5. Scalloway

    Scalloway UKBF Legend Free Member

    15,684 3,313
    Being a subsidiary of a charity makes no difference for VAT or tax.
     
    Posted: Feb 12, 2020 By: Scalloway Member since: Jun 6, 2010
    #5
  6. paulears

    paulears UKBF Big Shot Full Member

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    I've been trying to find reliable information from the VAT folk on how to deal with charities and they seem as confused as I am. So far, this is what I have understood from the conversations.

    If a charity is VAT registered and exempt from VAT collection, then if that collection is then passed on, I do not suddenly 'add' it. In my case, it's events where the charity is the organiser and they pay me, out of the ticket money at an agreed rate, or a simple split. They have not charged VAT to the customers, so if I invoice them for (for example) £1000 plus VAT, they consider this wrong, and expect me to invoice for £1000 and not charge VAT, as they are exempt. The VAT people tell me that I could invoice with VAT, and they could cancel it out with a reclaim - but this actually goes nowhere as it cancels out. If I am sure they are exempt and a charity, I do not have to charge VAT. There's a risk of course, but the usual chain is pointless as there's not unregistered people in the chain. I suspect though, that in this case because there are public at the end, you will have to add the VAT?
     
    Posted: Feb 12, 2020 By: paulears Member since: Jan 7, 2015
    #6
  7. Scalloway

    Scalloway UKBF Legend Free Member

    15,684 3,313
    If conditions are met a charity pays no VAT (the zero rate) when they buy:

    advertising and items for collecting donations
    aids for disabled people
    construction services
    drugs and chemicals
    equipment for making 'talking' books and newspapers
    lifeboats and associated equipment, including fuel
    medicine or ingredients for medicine
    resuscitation training models
    medical, veterinary and scientific equipment
    ambulances
    goods for disabled people
    motor vehicles designed or adapted for a disability
    rescue equipment

    Otherwise they just have to pay the VAT. There is no special exemption per se for charities.
     
    Posted: Feb 12, 2020 By: Scalloway Member since: Jun 6, 2010
    #7
  8. paulears

    paulears UKBF Big Shot Full Member

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    That is not a definitive list. There are many theatres that operate as charities, and they do NOT charge VAT on ticket sales. We've come across dozens with what we do and they all operate the same scheme. Is there an updated list that isn't available on the net, because for many charities running theatres, the exemption works very much in their favour. The VAT content on a full house can be considerable. The VAT people clearly run the scheme, and are aware of it, so I wonder what exactly it is? I've been trying for years to find the definitive instructions in the VAT lists, but cannot.
     
    Posted: Feb 13, 2020 By: paulears Member since: Jan 7, 2015
    #8
  9. Scalloway

    Scalloway UKBF Legend Free Member

    15,684 3,313
    I found this.

    https://www.gov.uk/hmrc-internal-manuals/theatre-tax-relief/ttr70030

     
    Posted: Feb 13, 2020 By: Scalloway Member since: Jun 6, 2010
    #9
  10. spidersong

    spidersong UKBF Newcomer Free Member

    281 109
    I'm with Scalloway that is a definitive list, the list as stated is when charities don't pay VAT on things they buy. Those should be the only supplies they GET VAT free.

    Whether they need to charge VAT TO their customers is a different list and neither here nor there to anyone making a supply to them. The fact that they make exempt supplies to their customers using supplies that they've been charged or not charged VAT on makes a difference to their profitability but not to whether someone needs to charge them VAT.

    And almost every charity considers it wrong that people charge them VAT, that doesn't however make it wrong.

    So if they've hired you to do work that is ordinarily taxable and isn't on the list given then your charges are VATable and the fact you're taking it as 'commission' or a deduction from their income isn't relevant.

    The way to look at it is as the two separate transactions it is; The Charity is selling tickets to an exempt event (either through the fundraising exemption or the cultural exemption, as there are two reasons they might not have to charge VAT). You are selling them some services, if your services are in the list at post 7 and they meet the conditions then you don't charge VAT, otherwise you do. The fact that you net your charge off their income is irrelevant as is the fact they feel they shouldn't suffer VAT deduction out of it.

    VAT Act 1994, Schedule 8, Group 15 gives an almost complete list of items/services that a supplier can zero rate to a charity (it misses some construction services that are listed in Group 5).

    The things a charity can exempt when they make a supply to a customer are found in Schedule 9 but are irrelevant to their suppliers (but if anyone wants to know can be found in Groups 6, 7, 10, 12, and 13; with particular reference from this discussion to Group 12 'Fund raising events' and Group 13 'Cultural Services').
     
    Posted: Feb 13, 2020 By: spidersong Member since: Aug 20, 2008
    #10
  11. paulears

    paulears UKBF Big Shot Full Member

    4,131 1,039
    Sorry to have hijacked this topic so maybe a split? Scalloways info could just be what is happening. The box office take does not include any VAT and as such I can see why they constantly insist that our demand for more if it is unreasonable. This may be what the vat mans suggestion means? Our percentage must be net because there was no vat in the first place. The problem is that we agree a price/deal plus vat then they want the vat off, after we’ve performed and as 50% of the band are vat registered it means my fee suddenly gets reduced because what they pay is not enough! As that info suggests it’s the smaller venues run by mainly volunteers where it happens and there is no proper accounts dept to argue it with. Treasurer says we don’t pay vat and they just pay the net!
     
    Posted: Feb 13, 2020 By: paulears Member since: Jan 7, 2015
    #11
  12. lesvatadvice

    lesvatadvice UKBF Regular Free Member

    756 113
    Lots of valuable comments above. To which I add the consideration of a VAT Group registration. We often find this improves overall VAT recovery for a charity and subsidiary.
     
    Posted: Feb 13, 2020 By: lesvatadvice Member since: Jul 7, 2011
    #12