VAT - Charitable Trusts and Buildings for a Charitable Purpose

VAT - Charitable Trusts and Buildings for a...

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Hi

A client wants to build a large sporting community centre with money that will raised by a set-up charitable organisation. The building will be given to a charitable trust when it's completed and build costs are expected to fetch £1.85m.

Now from my VAT studies this appears to me as a Schedule 8 Group 5 VATA 1994 issue where if a building is built for a charitable purpose, the onward supply of the first major interest and build costs associated with it (exc. architects, and that kind of thing) can be zero rated for VAT purposes.

Am I on the right track here or is there something else I should be concerned about particularly with regards to charitable trusts where I don't have much experience in?

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By spidersong
26th Mar 2010 11:38

Chain of supply

My first reaction was with Oxontax, that there's a non-business disposal.

However I'm a bit confused about who's supplying what to whom, as what you want to achieve should largely be achieveable under item 2 of the group rather than item 1 (which you've pointed to) depending on who's providing what services to whom.

So we have A - The client, B - A Charity set up by A, C - The community/sports centre charitable trust? Is this correct.

Are A meant to be providing building services to B? or is there an independent contractor to do this?

If building services are provided direct to B then they should be able to get these zero rated, and so only professional fees should incur VAT, their gifting or entrusting should still mean that the building will be used for a charitable purpose. (If A's providing the services then there are various rules to ensure that costs are charged at an arms length level)

I assume that the use of the centre will be non-commerical i.e similar to a village hall, or all free, so there'll be no coaching or similar provided by employees of the trust etc.

So as above my concerns would be that a there's no zero rated disposal, but there should (hopefully) be zero rated construction services. But it all rests on the building not having any commercial use, and if run as a sports centre then that would be business use.

So to give a better view or suggestions I think we'd need more detail on the structure of the deal, the supply chain, and the day to day use once the build is completed.

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By luke.hector
26th Mar 2010 11:45

I'll Enquire

I'll enquire into those points. I don't think there will be any commercial use, but again I'll check and get back!

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