Rulings give VAT hope to charities

More charities could be eligible for a zero VAT rating on building work, after two rulings from VAT tribunals.

Scottish charity Quarriers had been told by HM Revenue & Customs that it had to pay VAT on a new epileptic-assessment centre and on a school for children with severe emotional difficulties because most of its funding came via local and central government contracts, and it was therefore operating as a business.

Tribunals on the two cases ruled that because Quarriers was reliant on public donations to make up its funding, it was not in business and was therefore entitled to VAT-free construction.

“The watershed between being in business or carrying on a charitable activity can be critical for charities for VAT purposes,” said Debbie Jennings, VAT director at PKF accountants.

“The right to VAT-free new buildings and reduced rate VAT on fuel depends on charities being able to show that they are not in business.”

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