 Autumn Statement: Charities set to benefit from VAT savings
29 November 2011: PKF Accountants & business advisers welcomes the Chancellor’s announcement in today’s Autumn Statement about the introduction of a cost-sharing exemption from VAT – but it is concerned that comments made in a subsequent guidance note may leave room for the Treasury to water down proposals first mentioned in a Consultation Document earlier this year.
EU law already allows ‘non taxable’ organisations, such as charities and exempt businesses, to save VAT by forming associations to share costs – similar arrangements will be allowed in the UK from April 2012.
The cost sharing exemption exists to mitigate the VAT costs where a small or medium sized organisation, which undertakes non-taxable activities, buys-in services that larger organisations would carry out in-house (such as IT support, accountancy services, legal advice etc). The exemption envisages smaller organisations ‘clubbing together’ to form an association to buy-in or provide these services to its members. The association then shares the cost of the services to its member organisations, without having to charge VAT on these recharges.
Richard Wild, Director of VAT at PKF, said:
“The introduction of the cost-sharing exemption is long overdue as it has the potential to give many charities a much needed cash boost.
“The detail will be revealed in draft legislation next week, but HMRC has already announced that the actual implementation ‘differs in a number of material ways from that outlined in the Consultation Document’ earlier this year. This is a concern. We hope that the exemption will still encompass the type of support services that exempt and not-for-profit organisations wish to share: making it easier for them to realise the VAT savings that the EU rules are intended to make available.”
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For further information, please contact: Andy Konieczko, 020 7065 0537, andrew.konieczko@uk.pkf.com
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