Contributions and VAT

Getting round VAT charge on charity contribution

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The company I work for did some work involving hiring a day-boat. The boat hire was to be 'covered' by a local charity, who in previous years had paid the skipper direct, but for some reason asked us to pay him this year, to be reimbursed by them. Of course when I come to invoice them I will have to charge VAT which they will not be able to reclaim. Is there some way of treating it as a contribution so that we don't have to charge them an extra £40?

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chips_at_mattersey
By Les Howard
21st Jul 2016 12:32

(I assume the boat transport is not zero rated? 10 passenger rule)
A payment FOR something is a consideration for a supply. So, even you describe the payment as a gift, it is payment for a taxable supply.

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By Portia Nina Levin
21st Jul 2016 13:13

I disagree that zero-rating might be in point Les.

If the "some work", which involved using a boat, is being invoiced to the charity for a consideration of £Y (being an agreed amount for the work itself, £X, plus the cost of hiring the boat), and "some work" is a standard-rated supply, then VAT must be applied at 20% to £Y.

The exception, of course, would be if the cost of the boat could be treated as a disbursement, which should have already been zero-rated, if zero-rating applied. Unfortunately though "some work" does not really help us decide whether that might even be a possibility.

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Replying to Portia Nina Levin:
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By Fenella
21st Jul 2016 14:20

The work is a seabird survey commisioned by another (national) charity, but which the other (local) charity has always contributed to by hiring the boat. I guess both charities benefit from the work in some way, but we have usually charged the national charity for our fees (plus VAT). The boatman is not VAT registered so I don't think it has arisen before.

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