vat on secondment of staff chartiy to charity

vat on secondment of staff chartiy to charity

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Hi

I am working with a charity (charity A) who is potentially going to merger with another charity (charity B)

Charity B has no CEO so in the interim pre merge the CEO of charity A is going to be seconded for 30% of his time to charity B.

Charity A has no business activity

Charity B does have business activity, circa 20% of it's income.

Normally if charities second to each other and the secondee is not involved in business activity at either side and no profit is made on the costs charged, then it can be treated as outside the scope.

In this case though some of the secondment time is likely to be spent on managing the business activity and therefore falls foul of the exemption and VAT will need to be charged

This is unfortunate as 80% of the management will be on non business activity and therefore will produce an irrecoverable VAT charge.

Is it conceivable to say that there could be 2 separate secondment agreements one which is for hours spent on non business activity and one which is spent on business activity?  the non business one thereby not attracting VAT and the business one which would, but is recoverable.

Also, hypothetically, if Charity 'A' also had business activity would this mean that regardless of the arrangement the charge would be vatable as the manager was already involved in business activity and therefore any activity he is seconded to would also need to be vatable.

thanks

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chips_at_mattersey
By Les Howard
30th Oct 2015 16:56

Staff Secondment

There are two references in HMRC guidance to such arrangements:

PN 700/34, Appendix B, and 701/1, para 5.17.

I think the arrangement you describe is a genuine secondment, and is therefore not a taxable supply, as per the guidance. One relevant factor is that the arrangement, as you describe, is for convenience, not profit.

An alternative route would be to have a joint contract of employment, so both charities employed the CEO.

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By hairyfingers
30th Oct 2015 15:30

700/24?

Hi 

Thanks.

Did you mean to type a different notice?  700/24 is postage & delivery.

 

701/1 is the normal scenario whereby the activity the secondee is carrying out is either all business or non business.  The difference here is that the secondee is carrying out both business & non business as part of the role.

I suppose, as you say, it could be justified easily that this is an arrangement for convenience and not profit and so applying the Business Test it could be concluded they are not in business in this particular scenario?

 

 

 

 

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By DMGbus
30th Oct 2015 16:19
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