Charities given short-term relief from 'unintended anomaly' of new VAT rules

Charity Tax Group wants information from the sector as it lobbies HMRC on 'place of supply' concept

International charities have been given temporary relief from what HM Revenue & Customs calls an "unintended anomaly" that meant aid shipments could be hit with VAT bills, even on goods that never entered the EU.

An HMRC brief issued yesterday said the problem had come about as a result of new ‘place of supply' rules, which came into force on 1 January.

The rules say that tax is levied where the customer is based, rather than where the goods are shipped from.

The Charity Tax Group, which campaigns for a better deal on tax for charities, warned the move could cost agencies that ship aid into disaster zones such as Haiti millions of pounds.

Mathieu Mori, policy officer at the CTG, said his organisation was still campaigning for a permanent solution.

"This new relief is only temporary, and might not apply to costs incurred before 15 March," he said. "We're seeking more evidence to take to HMRC, and we're asking any charity that thinks it will be affected to provide us with information."

Charity tax campaigners are lobbying for HMRC to look again more generally at place of supply rules, which can present a significant VAT burden to charities and have been enforced differently in other EU states.

David Ainsworth recommends

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