Back to basics: VAT and where it's avoidable

Tips from John O'Brien, chair of the Community Accounting Network

Believe it or not, there are some special rules about VAT that are good news for charities. It does not matter if you are not registered for VAT - these apply to any charity. If you are not registered with the Charity Commission, perhaps because you're too small, you can apply to HM Revenue & Customs to be recognised as a charity for tax purposes and still benefit.

The main relief for charities is advertising. You don't have to pay any VAT if you advertise in someone else's newspaper, on their radio show or in any media communicating with the public. This includes recruitment and even such media as promotional stickers and pre-printed collecting envelopes. It also applies to payments you make to people who create your adverts. But you can't get relief on advertising in your own media.

Other reliefs are available for certain goods and services made available for disabled people, equipment for talking books and building construction for charitable use. You can also pay a lower rate of VAT on fuel for charitable use.

Another concession that is often overlooked, but can save a lot, is to do with rent. In certain circumstances, you can serve your landlord a disapplication notice to prevent them charging you VAT. It's complicated, with lots of small print, but worth investigating.

Overall, however, VAT remains a real tax burden on most charities and their funders.

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