VAT Issues for Grant Giving Charities
Grant giving charities may receive funds from a number of sources including
- Grant income
- Donations - these could be from individual members of the public, wealthy philanthropists, corporate bodies etc.
- Government funding
- Assets & funds transferred to them from other charities
- Trading such as charity shops or renting out property
- Investment income e.g. from endowments
- Provision of services to other bodies such as back office functions or supplies of staff
A number of VAT issues arise from these activities. In particular, it can sometimes be difficult for the charity to determine whether it is receiving grant money or delivering a service for which it is being paid consideration. This can be particularly problematic where the other party is a local authority and the wording of documentation can be very unclear. Another common difficulty is that the charity may retain a % of the funds that it receives, manages and distributes as a management or administration fee to cover its own running costs. It is not always clear whether there is a supply on which VAT should be charged.
There may also be difficulties with grant distribution where grant recipients may seek to incorrectly charge VAT to the charity.
Grant giving charities will also have a number of issues in common with the charity sector more generally. These could include:
- The need for a method to apportion VAT on costs between business and non-business activities
- Partial exemption methods
- Compliance with Making Tax Digital
- Monitoring taxable turnover for purposes of VAT registration
- Acquisition tax/reverse charges
- Charity VAT reliefs
- Attribution of input tax
Any charity who would like to access our help and support on dealing with VAT issues, please contact us at firstname.lastname@example.org