Good news on VAT recovery for Charities?

VAT is a minefield at the best of times and for charities even more so. Appeals to lighten the burden of the tax or to simplify it have fallen on deaf ears.

For charities incurring a VAT charge on costs and not being able to offset it or recover it had been a painful ongoing experience.

There may be a glimmer of hope for charities that are registered for VAT. In a recent High Court judgement, (29th July 2005) a charity, The Church of England Children’s Society, was allowed to recover a portion of VAT incurred on costs of fundraising for their unrestricted funds and VAT on the costs of their newsletter.

It was judged that the costs of fundraising for unrestricted funds were incurred for the general business activities and therefore a proportion of the VAT on those costs was recoverable. So charities that have incurred such costs should be able to recover more VAT. You should consider making a recovery claim as soon as possible. Remember that the VAT will be recoverable from 3 years prior to the date of the claim. The longer you wait the less you will recover. Please refer to your VAT specialist or accountant.

The downside? Customs may appeal against this judgement - so keep an eye on the press.

Visit www.smartresources.org the online resource centre for the social sector. There are features and articles on tax and finance from the charity specialists HW Fisher & Co.

Uday Thakkar