Accountants/VAT experts, can I ask you a question please?

[cktwo]

I am a bookkeeper and I have two clients that are charities. Do the normal laws of VAT cover charities, meaning they need to register if they are over the threshold? And is childcare VATable?

Many thanks in advance xx

Charities are covered by normal VAT rules, but VAT only applies to 'business income'. Most charities have some business income to raise funds but they only have to register if this income is over the threshold. Donations are outside the scope of VAT and don't count towards income threshold.

Try this for more info.

Childcare is not VAT able

Education is zero but childcare is exempt

So if charity that is a pre-school registered with HMRC they could charge 0% VAT on the childcare but reclaim on purchases?

I'm pretty certain the other client would not gain any benefit from registering though.

Thanks for your help. Every single one of my clients is under a different VAT regime and I'm slowly becoming an expert

If the service you supply is exempt then you are not able to claim input tax on any of your purchases

There are distinct differences between
Standard rated, Zero rated and exempt supplies.

I had this problem with a charity I was doing the books for too.

They had 95% of their income from donations but also sold some vatable merchandise.

They thought they could claim all the input vat for all their activities ie exps for events. But the vat office said they couldn't claim the portion of the input vat the resulted in the donation income - ie 95% of the input vat. So they de registered.

Ah. I knew it wouldn't be starightforward. TBH, it's probably going to be more hassle than it's worth then.
I'll have to bite the bullet and ring HMRC. I can never get a straight answer from them normally.

Some misinformation here, so to clear things up:

In general, the normal laws of VAT cover charities so they do need to register if they have VATable trading activities which are over the threshold. To avoid the complication and inefficiencies of partial exemption, it is common for charities in this situation to put these activities into a trading subsidiary. This would need to be set up professionally, although I believe the Charities Commission may give some free guidance.

In general, childcare is exempt from VAT.

Education is not zero rated, it is standard rated unless it is provided by an eligible school or college or qualifies as private tuition, in which case it is exempt.

The HMRC information on this is here.

Unless you are providing zero rated services, it is hardly ever worth registering unless you have to, but if there is any doubt you should seek professional advice. With respect, I would not normally expect advice on VAT efficient structures to be within the scope of bookkeeping services: apart from anything else bookkeeping PII would not cover it and could leave you personally liable.

Oh no, I'm not advising. It's just questions for my own peace of mind and knowledge. Both clients have accountants so they will be best to advise. Just trying to get the head up