By Jaspal Dhillon, senior manager, VAT
020 7490 7766
If you are a charity you will be aware that getting the most preferential VAT treatment is essential, as many charities are unable to recover VAT in full on their costs. A recent victory for a charity over HMRC might help.
The UK VAT law allows for the construction and supply of buildings used for a charitable purpose to be zero rated for VAT purposes. This essentially means the builder does not need to charge VAT to the charity. Included in the definition of a charitable building is a building that is to be used as a ‘village hall’ by the local community. What is and is not a village hall has been the subject of much debate in the Tax Courts over the years. You would be forgiven for thinking the actual term itself is quite dated!
In the recent case of Greenisland Football Club the taxpayer argued that the supply to them of the building of a new clubhouse was zero rated as a ‘village hall or similarly providing relevant charitable purpose’. HMRC disagreed, their main argument being that the management committee of the club wasn’t made up of members of the local community and that in the main the new clubhouse was used for ‘football activities’ and could not be used by the general public.
The Tax Tribunal found in favour of the taxpayer and in particular ‘ownership by the local community is not essential for zero rating’. Also, apart from when the team had a scheduled match, the facilities were available to the local community.
If you are a charity looking to minimise your VAT costs or a builder constructing new buildings for a charity, exploring potential VAT reliefs is something that should be considered and determined as early as possible.
Please contact our VAT specialist Jas Dhillon (firstname.lastname@example.org) if you would like to discuss these issues, or any other VAT matters.