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HMRC deny VAT claim of Covid-19 volunteer CIC

Claiming input VAT of CIC rejected due to volunteer group deemed 'not selling anything yet'

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A friend of mine is part of a nation wide voluntary group that was set up at the height of Covid in March/April to supplier PPE to local NHS and care home works for FREE. The group was set up before Easter as a CIC and incurs considerable amount of expenses in the production of those PPE. VAT was submitted recently and HMRC said since my friend's CIC were only 'donating' those PPE for free, they were not selling or making taxable supplies hence they couldn't claim the input VAT worth 5 figures.

I am in general practice but not a VAT expert in Charity/CIC so any help from anyone will surely help. I just found the whole argument from HMRC quite lame and clearly it looks like someone sitting nicely in their office (home office) were detached from the reality, not knowing what they are talking about and denying legitimate claim of a CIC who fought for the good cause while the country was languishing on as a direct result of the government's own incompetence to supply basic PPE to the NHS and care home. Their organisation relied on individual's donation and within a few weeks managed to spin up a large group of volunteer to plug the very gap in the medical PPE supply chain. Any help will certain be welcome. Many thanks.

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By Matrix
27th Sep 2020 16:20

I would get hold of the VAT registration and have a look at it.

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By Les Howard
27th Sep 2020 16:26

Donations are not supplies in the course of business, so input tax is not allowable. If the recipients of the PPE are making donations you might be able to argue that there are taxable supplies. Alternatively, a third party argument might work.
Happy to look at the correspondence and offer an opinion.

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the sea otter
By memyself-eye
27th Sep 2020 17:14

Good causes, donations, plugging the gap etc has nothing to do with VAT.

A worthy but pointless argument.

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By lionofludesch
27th Sep 2020 18:14

It's not a business because it has no sales.

The VAT registration falls at the first hurdle.

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By WhichTyler
27th Sep 2020 23:28

Why do you think their claim is legitimate?

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Jason Croke
By Jason Croke
29th Sep 2020 08:01

Interesting article here that further explains the HMRC rejection, and offers a suggestion but as others have posted, there is no place for emotion in VAT, you either make taxable sales or you don't, an issue familiar with many charities.

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