CIC pay VAT on waste collection

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I have been approached by a CIC in the north of England who pay a private company for recycling and waste collection.

The private company are due to invoice the CIC and are charging 20% VAT, however, the CIC are adamant that they are exempt from paying VAT on this.

It's been a really long week and am maybe being thick, but why wouldnt the CIC pay VAT?

I am totally baffled by this one.


Replies (8)

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By David Ex
09th Jun 2024 11:43

Are they claiming VAT exemption on all purchases or just on waste disposal?

I don’t think CICs enjoy a general VAT exemption.

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By Jason Croke
09th Jun 2024 11:55

CIC's aren't charities so even if there was an exemption for waste disposal for charities, it wouldn't apply to CIC's.

Two thoughts :

1. Common charity type approach where they think (wrongly) that they are exempt from all VAT and bully suppliers into not charging VAT anyway or

2. Really niche bit of law that sees Local Authorities who supply commercial waste disposal as not being subject to VAT because its a statutory service - there was a case back in 2016 where a commercial waste company were trying to change the law because it was unfair competition that they had to charge VAT but the LA did not.

So probably more likely that the CIC was previously contracted to an LA, receiving exempt supplies of waste disposal not because they are a CIC but because the supplier was the Council. CIC then went to tender, found a cheaper quote but assumed VAT was not in play.

Some Councils even use their VAT free status as a sales pitch, such as Westminster Council

"VAT free - As a local authority service, we are exempt from having to charge VAT. This can help many businesses improve their cash flow. "

Thanks (8)
Replying to Jason Croke:
By paulwakefield1
10th Jun 2024 07:51

As we've come to expect from Jason, a great answer and on a Sunday! Hats off to you Sir.

Thanks (5)
By lionofludesch
09th Jun 2024 23:32

You need to ask what legislation they are relying on for exemption.

Otherwise, you'll just be guessing.

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Replying to lionofludesch:
By Yossarian
10th Jun 2024 08:36

Often it seems to be the "We're a charity/CIC so we shouldn't have to pay VAT on anything, ever" legislation unfortunately.

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By rmillaree
10th Jun 2024 08:33

you should have the same robust approach to any client who thinks they shouldnt have to pay vat charged to them.

ask them to provide some evidence as to why they think this would be the case and sanity check that guidance with regard to other aspects of their business. Really its up to them to give you some clue here if you dont want to bne doing excactly what you are doing (probably trying to find something that may nol exist)

First question i would have here is are there any other expenses where they think they dont have to pay vat ? if there arent why would this situation be different?

As Jason has advised perhaps if they previously used the council and the council didnt charge vat that may have confused them - if thats the case just advise vat doesnt work like that.

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By tom123
10th Jun 2024 08:44

Probably the same kind of argument that says "we shouldn't have to pay vat on post and packing because there is no VAT on stamps"

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By pr27
10th Jun 2024 09:31

We get this a lot from customers of clients. Clients contact me asking if their customer is correct. Something along the lines of an email from them saying:

"We are exempt from VAT, please remove the VAT from your invoice."

This usually means they're not VAT registered as under the threshold, or they make exempt supplies.

The answer I always give is that you can't just walk into B&Q and tell them you're exempt from paying VAT and they'll knock the VAT off the price of your purchase.

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