HMRC Targets Small VAT-Registered Charities with Educational Campaign on Input Tax Apportionment

HMRC’s One-To-Many team is conducting an educational outreach aimed at small VAT-registered charities with turnovers of up to £2 million. This initiative seeks to raise awareness of the obligation to carry out business and non-business apportionment calculations for input tax. The campaign comes in response to a growing number of smaller charities failing to account […]

HMRC’s One-To-Many team is conducting an educational outreach aimed at small VAT-registered charities with turnovers of up to £2 million. This initiative seeks to raise awareness of the obligation to carry out business and non-business apportionment calculations for input tax.

The campaign comes in response to a growing number of smaller charities failing to account for their non-business activities, resulting in potential overclaims of input tax. To address this issue, HMRC has sent concise educational emails to selected charities. These emails provide links to existing guidance and highlight the importance of correctly apportioning input tax between business and non-business activities.

A copy of this communication has been shared with the Chartered Institute of Taxation (CIOT) to raise awareness among tax agents. This initiative underlines HMRC’s ongoing efforts to ensure compliance within the charitable sector.

This is a copy of the email HMRC are sending:

Do you know the difference between business and non-business activities?

Many charities, philanthropic and voluntary bodies and other non-profit making organisations have non-business activities.

If you carry out non-business activities, it could affect the amount of VAT you can treat as input tax. So, it’s important that you understand what business and non-business activities are.

For VAT purposes, ‘business’ means any activity which is mainly concerned with making supplies for a consideration.

What you need to do

HMRC wants to support customers to get their tax right first time.

Please review our GOV.UK guidance to decide whether your activities are ‘business’ for VAT

purposes.

  • Section 4.6 details the difference between business and non-business activities and provides examples of non-business activities.
  • Section 32 details how to apportion tax between business and non-business activities.

This can be a complex area of tax and you may want to ask an adviser for help.

If you have non-business activities and have overclaimed input tax

Please let us know. You can find more information by reading HMRC VAT Notice 700/45 – this explains how to notify HMRC of errors on previous VAT returns.

For more information on potential penalties, go to GOV.UK and search ‘HMRC compliance checks factsheets’, then choose ‘Penalties’.

Need Assistance?

If you require any support, please do not hesitate to contact us. We also offer comprehensive VAT health checks to ensure your business remains VAT compliant.

Jane Deeks

Tel: 07710553831

jane@deeksvat.co.uk

Managing Director

Deeks VAT Consultancy Limited

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