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VAT on provision of staff to a charity

VAT on services provided to a charity

Dear All

I have a client who is seeking to ascertain whether the supplies her company makes to a charity are taxable or not. Correspondence with HMRC has failed to provide a definitive answer and obviously she wants to be as near to 100% sure as possible, before she ceases treating it as taxable.

Company provides a team of staff to a charity looking after adults with learning and physical disabilities, the care plans for whom are with the charity as they are the legal property of the disabled person. Up until now, the company has charged VAT but is becoming increasingly frustrated as other providers are not and so they are losing business due to their charges being 20% higher than those other providers.

HMRC have referred her to VAT Manual VATWELF2120 which suggests that a commercial welfare provider may be able to exempt their supplies if 2 requirements are met:

1. supplies are connected either to welfare or social security work. This requirement is very much met.

2. supplies are made by bodies governed by public law or other organisations recognised by the Member State concerned as essentially charitable. This requirement is not met. However there is some uncertainty as to the meaning of 'organisation' in that it is considered sufficiently broad so as to include private profit-making entities/natural persons running a 'business'.

Has anyone any experience of this type of situation and can help advise my client? Client is happy to pay for the right service.

Thank you!



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19th Jun 2018 18:16

Be honest - is her company "essentially charitable" and supplying staff out of the goodness of her heart or is her company earning a bit of an over-ride on this supply of staff ?

Therein lies the key to your problem.

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19th Jun 2018 20:48

There are other possible options:
1. Change of contract, so that company supplies welfare or medical services, instead of staff.
2. Joint contracts of employment.
But would need more detailed analysis of arrangements.

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