Respond to consultation on VAT, charities are urged

By David Ainsworth, Third Sector, 20 August 2008

Sue Ryder Care: charities with trading arms could benefit

Accounting experts are urging charities with business interests to respond to an HM Revenue & Customs consultation that should win them a better deal on VAT.

HMRC has proposed changes to the laws covering partial VAT exemptions, which would mean fewer calculations and simpler rules for charities. At present, organisations have to go through a complex series of processes to work out what portion of VAT they can claim back and what they must pay.

"The changes HMRC wants to make could benefit the third sector considerably," said Graham Elliott, charities specialist at consultancy Haysmacintyre. "It's important charities respond to this consultation."

Elliott said the changes could include the possible abolition of the difference between non-business and exempt activities. "This is a pointless distinction that wastes a lot of time," he said.

Thomas Mobee, senior VAT manager at accountancy firm Saffery Champness, agreed. "There are some excellent proposals that we should make sure go ahead," he said.

The new rules offered other advantages, he said, including allowing charities to use one set of calculations over a whole year and make an adjustment at the end, rather than making quarterly calculations.

The Charity Tax Group also encouraged charities to respond to the consultation, but warned it offered difficulties as well as advantages.

"For many charities, what is proposed won't result in major changes," said Richard Bray, a member of the CTG committee and finance director of Cancer Research UK. He also said that some changes could result in more complexity.

The consultation is available from the HMRC website. Replies must be made by 30 September.

New users register here FREE for full access