Input VAT reclaim

Can input VAT be reclaimed in these unusual circumstances?

Didn't find your answer?

A firm (not clients) doing work for us on our computer systems is engaged in providing free computers for deprived families via a charity who is receiving grant funding. The charity proposes that they "give" the grant funding to the company, the company buys the computers/laptops/tablets and then gives them away.

The question asked of me is could the company reclaim input VAT on the hardware they buy if there is no onward sale? Or would they have to bill the charity so that's where the output VAT comes in? I can't see how they can recalim the input VAT in these circumstances but I can see why the charity thinks this may help.

I said I'd ask the question for them because it's a new one to me and there's quite a lot of money involved

 

 

Replies (9)

Please login or register to join the discussion.

RLI
By lionofludesch
24th Apr 2021 11:41

Ah right - so the charity will pay the grant whether or not the company gives away the computers ?

No ?

Then there's some element of mutuality in there. The gifts are not unconnected.

Thanks (0)
avatar
By Paul Crowley
24th Apr 2021 14:12

The person at risk is your non-client.
Is he making business supplies? (my guess NO)
Does company become Partly exempt as a result of grant ( no idea as not seen grant paperwork )
Is charity a reliable expert in VAT (Unlikely)

If the suggestion came in writing from charity then ask charity if they agree that it can be forwarded to HMRC for written reply that can be relied upon from HMRC

Thanks (0)
avatar
By Paul Crowley
24th Apr 2021 14:24

wording is vague
A grant is not a gift
A grant comes with rules on how it will be used
Is it the company or director that gets the grant?

Thanks (0)
Replying to Paul Crowley:
RLI
By lionofludesch
24th Apr 2021 14:24

And does the charity have the power to make such a grant/gift to a commercial business ? (I'm guessing no.)

Or are they just using this business to get HMRC to make a contribution to their largesse ? (I'm guessing yes.)

Thanks (1)
Replying to lionofludesch:
avatar
By Paul Crowley
24th Apr 2021 14:28

My thoughts as well
Non-client is the one taking the risk
Best that Charity buys the computers and director works for free

Thanks (1)
avatar
By Tax Dragon
24th Apr 2021 17:11

Curious as to what you advice would be had they been clients.

Thanks (0)
RLI
By lionofludesch
24th Apr 2021 17:23

There's a possible SAR to consider.

Thanks (1)
Replying to lionofludesch:
avatar
By Tax Dragon
24th Apr 2021 18:25

Maybe not currently. But NEIP.

Had the OP been sensible, not got involved and simply said "ask your accountant", it would never have entered into consideration. Having not been sensible, got involved, etc, OP's maybe given themselves a headache.

Thanks (0)
VAT
By Jason Croke
24th Apr 2021 19:58

Giving goods away = non business and therefore no right to reclaim input tax. So the company will incur irrecoverable VAT.

If the charity was selling those goods on, then it is possible for the company to zero rate their donation and reclaim input tax.
https://www.gov.uk/tax-limited-company-gives-to-charity/equipment-and-tr...

But the charity gives the computers away, which is also non business and so they can't reclaim the VAT either.

Not convinced the charity can give the grant money to a third party supplier, charity would have to buy the goods with the grant by placing an order like everyone else has to.

Thanks (1)