I am the treasurer for a charity that runs a community centre. We currently have a hirer (railway contractor) that is paying for sole use of a room to use as an office for the next few months. They have agreed to pay us for the cost of extra security measures (additional PIR sensors) for the room which we will keep once they leave. We have already paid the security suppliers invoice ouselves and I am now in the process of invoicing the railway contractor for the same cost.
My question is; does the VAT pass onto them as it would with any "normal" sale or does it stay with the charity? Or more practically put; do I list the VAT we have paid on the railway contractors invoice or do I just charge them for the total cost and put nothing in the VAT box?
The charity is registered for VAT although it does not charge it on room hire, it does on membership subscriptions.
There are several options, and a lot of it depends on the tenant agreement but I personally would post the purchase of the PIR to Fixtures and Fittings, as an asset owned by the charity, and make an additional service charge to the tenant for security at cost and charge VAT.
This way the charity retains ownership of the equipment, and the tenant pays for it.
Like I said though, there are other options but to me this seems the simplest.
That's kind of what I was thinking after I finally found information on disbursements and recharges on the HMRC website today - that took a lot of Googling when you're not sure what you're looking for - never heard of disbursements before! You learn something new every day.
I am self taught with what I do as a treasurer so I am always learning, even more so now I am studying AAT Level 2 - although it doesn't cover VAT in-depth (I think that's covered by level 3).
After reading the HMRC guidance a few times I realised it wasn't a disbursement as it wasn't the railway contractors responsibility to pay for the sensors, they just opted to cover the cost.
I needed the extra confirmation that I was on the right track so cheers for that.
