Help with friends Charity VAT

How to Reclaim VAT for charity

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Hi,

I passed my AAT Level 3 in November 2017 and have been approached by my friend who runs a not for profit charity asking how he can reclaim VAT on vehicles and other vat inclusive items purchased for the charity. All the services are provided free of charge and assisted by volunteers. They raise funds by collecting donations and selling merchandise for a small fixed fee. The charity isn't currently VAT registered and I am aware it will need to be in order to claim any VAT back. What I need to know is; 

1. Do I need any form of license to do this for him or can he submit the documents from my advice without me having to obtain a licence.

2. Does he have to charge VAT on the merchandise he sells once he is VAT registered?

3. What can he reclaim VAT on

4. The charity has been running for a few years and he has never been VAT registered and therefore has never reclaimed VAT, can he reclaim this VAT back or is it too late?

Any advice would be greatly appreciated. I just need to know where to start. 

Thanks in advance to anyone that can help. 

Mike

Replies (16)

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RLI
By lionofludesch
24th Mar 2018 15:49

Mike - we need to know a lot more about your mate's charity.

Most importantly, how much does it make from selling stuff and how much from donations ? Registering for VAT isn't a ticket to free VAT refunds.

Even if it does have some form of trade, it doesn't necessarily mean that the whole of the VAT will be recoverable.

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chips_at_mattersey
By Les Howard
24th Mar 2018 16:05

Do your sums before you register. It may be that you would be out of pocket if you do so (this is true of many small charities).

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By Wanderer
24th Mar 2018 17:32

Mike

You are way out of your depth.

Whilst it is laudable that you are willing to help both a friend and a charity as already suggested above it doesn't follow that registration means all VAT incurred can be reclaimed.

You ask "Any advice would be greatly appreciated. I just need to know where to start." you actually need to know a great deal more than that. The best advice is to stop, before you start.

Here's some background reading for you:-
https://www.gov.uk/government/publications/vat-notice-7011-charities/vat...

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By mcfc83mike
24th Mar 2018 23:13

I know I'm out of my depth which is why haven't just dived right in and am on here to get help, advice and to learn. I have had a scan of the 701/1 and am trying to understand it and with someone's help I might do and will also ring the HMRC for assistance before doing anything. I have asked my friend what the charity makes in donations and merchandise sales and will respond once he answers. The charity helps the NHS deliver blood, breast milk etc between hospitals in urgent need via volunteer motorbike riders and car drivers. Where most vehicles are donated he has recently had to purchase a vehicle inclusive of VAT and was wondering if there was any way of reclaiming it, I think it's a couple of grand which would help the charity loads if he claim even a portion of it back.

Thanks

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By chewmac
24th Mar 2018 23:34

Worth keeping in mind that some goods can be zero rated when being sold to a charity. Nots cars. You’d have to register for VAT and carefully do the sums first as already advised above.

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Replying to chewmac:
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By mcfc83mike
25th Mar 2018 00:01

It's the sums I need to work out that's bothering me. He has been given a VAT receipt for this particular vehicle. I'm not sure what he can claim vat on and if he needs to declare vat on any merchandise sold even though it's sold at a fixed fee to raise funds for the charity. He just wants to know if it's possible to Reclaim VAT on the recent vehicle purchase.

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Replying to mcfc83mike:
RLI
By lionofludesch
25th Mar 2018 07:55

Vehicle, vehicle, vehicle - what sort of vehicle ?

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By mcfc83mike
25th Mar 2018 08:11

Oh yeah that does help. A Van, they potentially purchase Cars and Motorbikes in the future too.

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Replying to mcfc83mike:
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By lionofludesch
26th Mar 2018 09:56

Chance of getting the VAT back on the car and bikes is slim to none.

What is the van for ? Is it in connection with the taxable income or the exempt income ?

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Replying to lionofludesch:
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By paulwakefield1
26th Mar 2018 13:10

Why not the motorbike? If VAT is recoverable at all by the charity, I would think the bike is.

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Replying to paulwakefield1:
RLI
By lionofludesch
26th Mar 2018 13:25

We need to know more about this motorbike.

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Replying to lionofludesch:
RLI
By lionofludesch
26th Mar 2018 14:03

lionofludesch wrote:

Chance of getting the VAT back on the car and bikes is slim to none.

What is the van for ? Is it in connection with the taxable income or the exempt income ?

Sorry - I missed the post where you said what the motor bike is used for. I agree that the VAT is probably recoverable here.

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By paulwakefield1
26th Mar 2018 13:42

True enough. But from the information so far, I would have thought it is likely to follow the van.

It does sound as if they MAY qualify as a Medical courier Charity in which case they may not need to register to recover VAT.

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Replying to paulwakefield1:
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By mcfc83mike
26th Mar 2018 14:03

Yes that's right it is a medical courier charity. Been looking at the 701/1 and 701/6 . Think I will ring HMRC to see if they can clear it up a bit.

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By mcfc83mike
26th Mar 2018 13:56

What exactly do you need to know?

The charity doesn't charge anything for its services it's all volunteer based. Funds are raised through charitable donations and the sale of merchandise for a fixed sum which I believe falls under exempt from VAT as it raises less than £1000 p/w.

Looking at the 701/1 it doesn't look like VAT can be reclaimed through a tax return because the charity can't register for VAT as it doesn't have any taxable income.

Any vehicle (van/car/bike)purchased is solely used for the charity to provide it's services and attend fundraising events.

I have read that charities can purchase items at a reduced or zero rate when providing an exemption certificate.

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Replying to mcfc83mike:
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By chandler
05th Jun 2019 14:05

Blood Bike charities have been able to reclaim the VAT on their non-business payments since April 2015. Have a look at https://www.gov.uk/guidance/claim-a-vat-refund-as-an-organisation-not-re...
You will need to construct a spreadsheet of all the non-business items on which you are reclaiming VAT.
It's pretty straightforward.
Sorry this is late in coming but I have only just seen your question.

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