VAT on donation element of ticket sales

VAT on donation element of ticket sales

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A networking event took place where tickets cost £40 (plus £8 VAT). 20% of the ticket sales are to be donated to a local charity, should the £8 from each ticket have VAT added on when it is sent to the charity?

I wouldnt see why it would but just want to double check as a client seems to think it should be.

Thanks

Chicka

Replies (11)

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By mikeyban
20th Jul 2014 22:55

No ... It's not a supply.

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By Steve Kesby
20th Jul 2014 23:03

There is a supply!

Presumably, people pay the £40 plus VAT whatever happens. They can't say "no I'll just pay £32 + VAT, because I don't want £8 of my money to go to charity", I assume?

That being the case, the attendee is being supplied with entrance to the networking event and the consideration is £40 + VAT. The fact that £8 then goes to charity is irrelevant.

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Replying to John Stone:
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By mikeyban
21st Jul 2014 07:55

Steve ... Have another look?

Steve Kesby wrote:

Presumably, people pay the £40 plus VAT whatever happens. They can't say "no I'll just pay £32 + VAT, because I don't want £8 of my money to go to charity", I assume?

That being the case, the attendee is being supplied with entrance to the networking event and the consideration is £40 + VAT. The fact that £8 then goes to charity is irrelevant.

Steve

I think the OP was saying has the VAT any consequence on the charity?

I think you have misunderstood the point?

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By chicken farmer
21st Jul 2014 07:27

But no supply by the charity
Which is what mikeyban was saying and which was really the question being asked

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By chicka
21st Jul 2014 08:29

Thanks everyone I didnt think I'd get any replies until this morning :-)

I'm actually looking at it from the perspective of the company receiving the income from the ticket sales and paying over the donation to the charity.

So the answer is no VAT to be added to the donation to charity?

Thanks so much!

 

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Stepurhan
By stepurhan
21st Jul 2014 09:00

Confusion understandable

I understand why Steve thought we were talking about the original ticket sales. The OP is asking whether VAT should be added or not. This is only a matter for the OP in connection with sales. When you are making payments, it is the recipient, not the payee, who determines whether VAT needs to be included. Someone making a payment cannot simply decide whether they think VAT is due or not, though they may argue for an alternative treatment based on the VAT regulations.

The real question is how the 20% of ticket sales to charity was advertised. If I have paid £48 for a ticket, then I expect £9.60 (20% of £48) to go to charity, not £8. This is not adding VAT to the charity payment, it is just calculating the amount to go to charity on a higher figure. Unless the 20% donation has been specified as on ex-VAT figures, then I think the donation should be £9.60 per ticket. The OP's client will just have to absorb the extra £1.60 a time that, whilst not VAT itself, is calculated on the VAT portion of the ticket price.

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By User deleted
21st Jul 2014 09:13

I don't think it's an overly complicated question:

£40+VAT (£8) is a taxable supply. £8 is VAT collected and is owed to the taxman - no part of it can go to the charity!!

 

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Replying to lionofludesch:
Stepurhan
By stepurhan
21st Jul 2014 09:39

One complication.

taxguru wrote:
I don't think it's an overly complicated question:

£40+VAT (£8) is a taxable supply. £8 is VAT collected and is owed to the taxman - no part of it can go to the charity!!

The £8 as VAT collected I agree with. That none of that VAT is paid to the charity I agree with. Whether that £8 should be used in the calculation of the entirely separate donation to charity is the question.You would not be paying over the VAT, you would simply be calculating a higher, entirely separate, donation. From an accounting point of view, the donation is an entirely separate transaction and the source of funds used to pay it irrelevant. 

It is possible that "proceeds" could be interpreted as the after VAT figure, but non-VAT registered businesses will have entirely borne the £48 cost and see that as proceeds instead. If punters expect the donation to be calculated on the full £48 then making a lower donation (justified by the company only being entitled to £40 of that £48) could backfire.

Whether the overall figures are large enough or the donation public enough for that to be a concern is another matter.

 

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Replying to Matrix:
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By User deleted
21st Jul 2014 10:41

The obligation (contractual or otherwise) is to provide 20% of the proceeds. The vat element is an indirect tax collected out of a legal obligation and is owed to the taxman!!!

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Replying to ocooper:
Stepurhan
By stepurhan
21st Jul 2014 11:14

You are missing the point

taxguru wrote:
The obligation (contractual or otherwise) is to provide 20% of the proceeds. The vat element is an indirect tax collected out of a legal obligation and is owed to the taxman!!!
I am not disputing that the VAT element is an indirect tax collected and owed to the taxman. That is irrelevant. The donation is an entirely separate transaction no matter how it is calculated. The question is how the basis of the calculation has been advertised.

Say the promotional material said "Ticket Price £48.00. 20% of ticket price to go to charity". On the basis of that statement, the reader will naturally expect a donation of £9.60 per ticket. The 20% calculation has been related to a ticket price of £48.00. The fact we know that include £8.00 VAT does not change that.

Alternatively it could have said "Ticket price £40 + VAT". Then the expectation is of a donation of £8.00 per ticket, as the ticket price has clearly been stated as £40, the ex-VAT figure.

The real problem arises if the material just said "Ticket price £48 including VAT. 20% of proceeds to go to charity". In this case it is not clear whether the inclusive or exclusive price is to be used in the calculation. I think most would accept proceeds to mean the ex-VAT figure though.

My point is that the donation calculation is simply that. The calculation is no more about paying any VAT over than any other payment the company makes. It is akin to those adverts that say "we will pay your VAT" when what they are actually doing is providing a discount equivalent in value to excluding VAT from the purchase. Committing to a calculation that used the VAT-inclusive figure would have been foolish, as the donor has to fork out an extra £1.60 a time from their own pocket. But if that is how the promotional material has indicated the calculation will be made, that is their problem.

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By Steve Kesby
21st Jul 2014 09:27

Agreed

The £8 being paid to the charity isn't consideration for any supply.

I'd misunderstood the OP to be asking whether the £8 element when included in the original consideration was non-VATable.

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