Hi I'm a new member and would appreciate some advice.
I'm an accountant who has recently taken over compiling a charity vat return. Using the previous accountants method all input vat is reclaimed. There is little if any output vat. The charity is grant funded (local authority) and contracted income (local authority income all falling within charitable activity purpose).
My first question is can all the input vat be reclaimed, in my previous experience (public/private sector) the grant is outside of scope and therefore irrecoverable. Or is this ok for a charity?
Also in the sales figures, previously donations and interest were included in the sales figures on the return. is this ok?
Your advice/opinion will be much appreciated.
Thanks
Generally speaking you cannot claim input VAT on out of scope income. You can claim it on trading income on which output VAT is charged. Donations should not be included in sales figures as again they are outside the scope of VAT.
Take a look at this http://www.hmrc.gov.uk/charities/vat/intro.htm
the previous post is correct. My concern is that you may have claimed VAT to which you were not entitled. You will need to consider repaying this. Additionally, legislation requires a formal Partial Exemption / Business:Non-Business method for calculating input tax. HMRC Information Sheet 06/11 provides more details. (I guess I should also ask whether the charity needs to be registered at all!)
