• Skip to primary navigation
  • Skip to main content
  • Skip to footer

Top notice bar

Call us on 08000 388799

Avanti Tax Accountants HomepageAvanti Tax Accountants

Bookkeeping, Accountancy and Taxation services

  • Home
  • About Us
  • Our Services
    • Bookkeeping & Accountancy
    • Corporation & Personal Tax
    • Payroll & CIS
    • Company Secretarial Bureau
    • Budgeting, Forecasting & Business Valuations
    • Mentoring & Business Coaching
    • Software & Training
  • Our Accountants
  • News & Insights
  • Send An Enquiry
Home » News & Insights » VAT and Charitable Donations

VAT and Charitable Donations

Posted on 1st June 2020

This again shows how complex VAT can be in what might appear to be a straightforward situation.

Crowdfunded Income

A client is unable to trade normally due to the current restrictions and is considering using their staff and resources to manufacture visors which would be gifted to the NHS. The visors will show their logo. They intend to finance this activity via crowd funding and wonder whether VAT will need to be accounted for on the crowd-funded income?

Will there be any input tax restriction in relation to the costs of producing the gifted items?

The crowdfunding income is not deemed to arise from a supply of goods or services to the person making the payment and this means that it is not treated as consideration and not subject to VAT.

The visors produced will be donated to the NHS and it is possible to see the costs incurred in producing the visors in two different ways:

The first is that the costs incurred have no business purpose. Strictly speaking entitlement to VAT recovery depends on the application of that cost to a taxable business purpose; thus, non-business activity could be seen to restrict recovery of input tax on both the directly related costs, and a proportion of overheads.

The second, and arguably more reasonable, way to see this is that the equipment is being given away as business gifts. The business logo is being shown on the visor, and while not the primary rider, this will show the business in a good light. Under business gift rules, input tax is recoverable in full, and if the total cost to the supplier of all the gifts to one person does not exceed £50 in any 12-month period there is no requirement to account for output tax.

Output tax on the cost value of the gifts will be required to be accounted for if the cost of gifts to one person does exceed £50 in any 12-month period. However, providing the NHS with a tax certificate similar to a VAT invoice may enable that VAT to be recovered by the NHS.

HMRC have not, to date, provided any guidance on PPE products being given away in such circumstances, but it seems likely that they will take a pragmatic view of the recovery of related input tax.

If the NHS was receiving donated funds, and then purchasing the items using those funds, the supply of the goods would be zero rated. Similarly, if a client personally raised the funds and then purchased the goods from the company to donate to the NHS the sale by the company would be zero rated.

Reproduced from Croner Taxwise

Share this post:

Share on TwitterShare on FacebookShare on LinkedInShare on E-mail

Filed Under: Exclusive News Tagged With: Charity, Charity Donations, Crowdfunding, VAT

Disclaimer:- The information contained herein is given by way of general guidance only and no action should be taken solely on the basis of the information contained herein. The Avanti Group (UK) Ltd will be pleased to provide further guidance on the issues, and how they might affect you. No liability is accepted by the firm for any action taken without seeking appropriate professional advice

Footer

Navigate

  • Find An Accountant
  • About Us
  • News & Insights
  • Privacy Policy
  • Letter Of Engagement

Our Services

  • Software & Training
  • Mentoring & Business Coaching
  • Budgeting, Forecasting & Business Valuations
  • Company Secretarial Bureau
  • Payroll & CIS
  • Corporation & Personal Tax
  • Bookkeeping & Accountancy

Get In Touch

Tel: 08000 388799
Send us an enquiry

  • Facebook
  • Instagram
  • Twitter
Copyright © 2023 Avanti Tax Accountants · All Rights Reserved
Part of The Maurice J Bushell & Co Ltd Franchise (UK) Ltd · Company Reg: 10407313 and The Avanti Group (UK) Ltd · Company Reg: 04635630 · Created by Purple Hippo
  • So we can contact you to discuss your enquiry
  • So a member of our team from your area can contact you
  • By clicking ‘Send Enquiry’ you agree to receive contact from Avanti Tax Accountants using the details given above. We respect your personal information and your privacy and will not share or sell your information to other organisations. Please read our Privacy Policy for more information.
  • This field is for validation purposes and should be left unchanged.