Dodgy VAT question

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Can a business buy an asset, reclaim the VAT and then donate it to a local Charity?

The business has no need for the asset , it's only buying it because it can reclaim the VAT and the Charity can't.

My advice to the Charity has been no but it would be good if somebody could point ne towards the relevant VAT legislation.

You might ask what's in it for the Business ; the CEO's father is a Trustee of the Charity.

[TownIdiot]

This is what the government website says

Equipment and trading stock
Your limited company pays less Corporation Tax if it gives equipment or items it makes or sells (‘trading stock’) to a charity or community amateur sports club (CASC).

Giving equipment
You can claim full capital allowances on the cost of equipment.

To qualify, the equipment must have been used by your company. This includes things like:

office furniture
computers and printers
vans and cars
tools and machinery




The key part seems to be that the equipment must have been used by the company to qualify for the full corporation tax relief.

[trickywoo]

https://www.gov.uk/tax-limited-company-gives-to-ch...

Seems you can reclaim the vat and then zero rate it to the charity.

Seems to vary depending on exactly what you are giving as a van for example needs to have been used by the company first. Don’t know what constitutes used though.

I’d say it’s a goer.

[akirk]

trickywoo said:

https://www.gov.uk/tax-limited-company-gives-to-ch...

Seems you can reclaim the vat and then zero rate it to the charity.

if your company makes the donation specifically so that the charity can:
sell the items
hire out the items
export the items

that presumably excludes the charity using it - seems to be a very specific set of reasons.

[Eric Mc]

Countdown said:

Can a business buy an asset, reclaim the VAT and then donate it to a local Charity?

The business has no need for the asset , it's only buying it because it can reclaim the VAT and the Charity can't.

My advice to the Charity has been no but it would be good if somebody could point ne towards the relevant VAT legislation.

You might ask what's in it for the Business ; the CEO's father is a Trustee of the Charity.

I have always thought that, in order for VAT to be reclaimed on a purchase, whether the purchase is for trading stock, an overhead or an asset, the item purchased should be for use in the activity of the organisation buying it.

Charities can apply for a VAT Exemption certificate for an individual purchase, if the item being purchased is being used by the charity to further its charitable aim.

So, rather than using a third party VAT registered business as some sort of intermediary, the correct course of action for the charity is -

go to the supplier of the asset they want to purchase

explain to the supplier that they are a registered charity (with proof - i.e. their registered charity number)

explain to the supplier that the item being purchased is to further the aims of the charity

ask the supplier to Zero Rate the supply of goods to them and provide an Exemption Certificate

That's the correct way to go about it.

Here's a link to HMRC's explanation -

https://www.gov.uk/vat-charities/what-qualifies-fo...

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Thanks Eric et al