Added VAT cost for charities
November 2010
The increase in the VAT rate to 20 per cent from 4 January 2011 will seriously affect all charities, in the same way as any other entity which is unable to reclaim all of the VAT it incurs.
Marcus Ward of Price Bailey, chartered accountants recommends a number of actions which to limit the impact of January’s VAT rise:
- Ensure any applicable reliefs are taken advantage of.
- If significant expenditure is planned, consider bringing it forward to before 4 January 2011 to take advantage of the lower VAT rate.
- Review the VAT position to ensure that the most appropriate partial exemption methods and non-business apportionment is in place.
- Review any land and property transactions. These are high value and some reliefs are available; additionally it is possible to carry out planning to improve the VAT position of a property-owning charity.
- Review VAT procedures to ensure that VAT is declared correctly – penalties for even innocent errors have increased recently and are incredibly swingeing.
- Consider a VAT ‘health check’ which often identifies problems and planning opportunities.
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