Does a PLC pay tax on a gift?

[FredKarnosCircus]

Am trying to arrange for a PLC to buy some equipment for a school.

Can anyone pls confirm whether or not the PLC can reclaim VAT on the equipment? They are VAT registered.

It makes quite a difference to the budget ...

Thanks :-)

What do you mean by a PLC? Presumably you're not meaning a public limited company...?

I do mean a public limited company. I'm getting sponsorship from them for school equipment.

Well ok assuming by plc you actually meant you're trying to get a company to but a gift...

www.hmrc.gov.uk/businesses/giving/gifts-in-kind.htm

Presumably the company has an accountant. They should ask them for more specific advice.

Presumably the school has a PTA. If so it's likely to be registered as a charity. So if they donate to the PTA that might cover the charity aspect of it possibly.

Thanks for that.

It's in the initial, informal stages and I'm just trying to give an idea of budget to the school. They then submit a request to the company.

I can't be seen by the company to encourage the school to make a maximum value bid, but - well, to be honest, I am trying to get the school as much as I can. No/reclaimable VAT means more stuff for the school.

If the company buys the equipment it cannot reclaim the VAT and there are going to be problems with warranty claims etc, let alone the administrative hassle involved.

If you want my opinion (I have been a Finance Director in a PLC) it will do you no good to start second-guessing the tax affairs of the company: tell them what you want and how much it costs, £x net plus £y VAT = £z gross. If that is more than they are willing or able to give, they will tell you.

Thanks. It's not really second guessing their tax affairs: I just wanted to know the VAT implications of the transaction, so we can get the maximum amount.

So the best way to proceed is for the company to gift themoney and the school to reclaim any VAT paid.

Yes. Note that in general, only LEA schools can recover VAT, private schools and academy schools cannot.

Note that there is one special situation where what I have said doesn't apply, and this is where the company that is making the donation normally makes supplies of the goods to be donated in the course of its (VATable) business AND the entity that is receiving the goods (either the PTA or the School as appropriate) is a registered charity AND that same entity is itself going to sell, hire out or export the goods. If all these conditions are satisfied, the supply can be zero rated. Note that this creates a potential loophole where the company can donate to the PTA equipment it normally sells and charge VAT at the zero rate. The PTA can hire this equipment to the school at a nominal rate. There are a number of pitfalls to this approach however (constitution of the PTA, challenge of nominal rate hire by HMRC, capacity of the school to hire from the PTA etc.), and specific advice should be sought from the financial advisers to the school and/or the charities commission in this case.

Sorry about that huge red herring :)

Sorry, in the middle of that should have said "If all these conditions are satisfied, the company's input tax in relation to the donated goods is unaffected and the donation supply can be zero rated.

Can the school claim Gift Aid if it has charitable status? As Gilly says, the PTA is.

Mr Anchovy - they are an LEA school.

Answered my own question - Gift Aid is only applicable on personal donations and relates to income tax.

But the company can claim Corporation Tax relief.

I've been a tad disingenuous here - I work for the company at a senior level, but not (as you may have realised as an accountant. Still, I need to get my ducks in a row before I start the process.

Oh. Unless you and your FD are not on speaking terms, it's probably best to explain to him what you want to achieve and let him worry about the tax position. If you are on speaking terms and want to remain that way (at least until he's approved the donation), it's probably best not to mention that you have been researching this yourself

Thank you for that advice :) I am going to take it!