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