What can charities do to incur less Value Added Tax (VAT) on property projects?

Are you a charity currently working on a property project and unsure about the VAT relief that is available to you?

Are you a builder that would like to understand how to work more competitively with charitable organisations on property projects?

In this video Alan Davis, VAT Partner here at Henderson Loggie, shares with you what charities, and builders working with charity clients on property projects, can do to incur less VAT.

Covered in this video:

► Example of VAT savings for charitable organisations
► What VAT relief charities have access to
► The advantages of knowing when zero rating applies

If you need help working with charity property projects, or you are unsure what to do, please drop into the comments section or contact Alan directly by email at alan.davis@hlca.co.uk


Charities and VAT

What I find when I’m talking to charity clients is that they are very cautious when it comes to VAT, but they’re also trying to make the most of every pound that they’ve generated.

They want to make sure that any VAT reliefs that are available that they have access to and they’re making the best of.

You may have heard of a few examples where charities have made significant VAT savings, and I’ll come on to share a couple of examples with you in a moment, but I would emphasise that it’s important to always remember that your circumstances are fairly unique, usually, and that you should take your own professional advice to ensure that you’re taking the right position, and particularly if the numbers are large.

How a charity saved £40,000 on VAT

Over the years, I’ve advised a number of clients in the charity sector on VAT. One relatively recent example was very close to home, actually. My son’s scout group were looking to build a new scout hut. The fee that was being quoted them was £200,000, and £40,000 on top of that would have been fairly painful for them to recover of VAT.

In that instance, a discussion of the scout group, we established that they could qualify for zero percent VAT because there was a community use to the building. When they gave a certificate to the builder, he was able to charge zero VAT and save £40,000 for the scout group. You can imagine how many bags they would have had to have packed in the local supermarket to raise £40,000.

Advising builders on VAT who work for charity clients

I’m also involved in the other side of the coin, advising builders who do work for charity clients. In that scenario, they’re looking to be as competitive as possible, so when they’re pitching for work, it’s a real advantage to understand and know that a potential client could qualify for zero rating.

It might even be a point of differentiation that they’ve paid attention to the use of the building, know that it qualifies for zero rating, and their pitch or their bid can be significantly lower than competitors’. It’ll show the clients and potential customer that they’ve paid attention, and any savings that can be made may even be recycled into extra work for the builder.

How can charities claim back VAT?

Well, zero rating is available for a number of things, one of which is the construction of new dwellings or charitable-use buildings. In the context of charitable-use buildings, that’s things like village halls or the example I mentioned earlier about the scout hut. That was a village use, and it qualified in that way.

In addition, zero rating is available for the creation of access for disabled people, so for example, widening doors, creating ramps would quality. Finally, zero rate relief is available for the creation or adaptation of areas for the use of disabled people, for example, things like wet rooms and wash rooms where they’re created to meet the needs of disabled people.

Any questions about saving VAT on charity property projects?

If you’re involved with a charity on a property project, hopefully, this short video has been of interest to you. If you have any questions, feel free to contact me directly at alan.davis@hlca.co.uk.

The information is this video is of a general nature and seeks to highlight some of the issues which could be affecting you and/or your business, including changes to financial regulation and legislation. Viewers should not rely on this information without seeking professional advice on its application in their circumstances.