Are you a UK VAT-registered charity or not-for-profit organisation? If so, are you claiming back all the VAT you are entitled to?

It’s easy to miss out on reclaiming VAT on your purchases. Here are some common issues:

• Partial Exemption Calculations: Charities often have business activities where they apply VAT and non-business activities that are exempt. This is called partial exemption. You might calculate the percentages wrongly and miss VAT on business expenses.
• Incorrect VAT Allocation: Assigning VAT on purchases to the wrong activities or costs could lead to under or overclaiming VAT. Identifying which purchases directly relate to VAT-charging activities is important.
• Zero-Rated Supplies: Some supplies received by charities are zero-rated instead of exempt. Confusing these could mean you underclaim VAT. Also, charities may not know about VAT reliefs available to them.

• Donated Goods and Services: Charities often receive donated goods and services. While these donations are usually zero-rated for VAT, this may not always be the case. Working out whether you can reclaim VAT on purchases related to using these donations, especially for business purposes, can be tricky.

• Reclaiming Overseas VAT: Charities could miss out on recovering VAT paid outside the UK. An overseas supplier may classify the charity as a non-business consumer. We explore this issue further in this blog.

How can organisations improve their VAT recovery?

• Educate staff about VAT rules to make informed choices and reduce errors.
• Keep detailed records of expenses, income and transactions for accurate VAT returns.
• Do regular VAT assessments to spot issues early and take corrective action.
• Clearly identify and separate VAT-liable and exempt activities to simplify VAT reporting.
• Ask HMRC for guidance on uncertain VAT treatments to prevent miscalculations.

How can we help? 

At gunnercooke Operating Partners, we’ll help you:

• Review your latest VAT return, including Partial Exemption Calculations.
• If significant, look for more reductions in previous VAT returns.
• Advise on how to adjust your next VAT return.
• Identify potential VAT reliefs available on purchase, as discussed in this blog.
• Prepare applications for VAT refund, if required, as explored in this blog.
• Deal with any HMRC queries regarding these applications.

Contact us to find out more about how we can help: neeraj.nagarkatti@gunercooke.com

Neeraj Nagarkatti

Associate Operating Partner — Tax Accountant