The Budget and how the VAT changes will affect charities

The main Budget news for the charity sector is the increase in the VAT standard rate to 20%, to take effect on 4^th January 2011. Many charities are unable to reclaim all the VAT they incur on costs and this rate increase, along with the announcements about the anti-forestalling legislation to prevent VAT pre-payment schemes, means potentially higher costs for charities.

The Budget also saw a commitment by the Government to look at implementing a VAT exemption for the shared costs of services between charities where there are potential VAT losses. This would be welcome news.

Changes to the Flat rate Scheme percentages were also announced in the Budget. (The Flat Rate Scheme is a special optional scheme for VAT registered business whose turnover is below £150,000).

The Budget also confirmed the previously announced changes relating to the rules on input tax recovery using the Lennartz principle for business and non business use.

Free Charity Seminar: Ways to minimise the VAT burden for Charities and Not-for-Profit entities

Buzzacott will be holding a free seminar on the afternoon of 28 October 2010 that will look at the VAT reliefs that are currently available and apportionment methods for recovery of VAT, giving a practical way to ensure that the VAT burden is kept to a minimum. This seminar is suitable for finance managers or for those involved in the financial affairs of their organisation. Please register here.