VAT Voluntary registration for charity shops
For VAT purposes income from sales in a charity shop are zero rated.If a smaller charity has shop sales under the present VAT registrationlimit, presently £67,000, it may consider the hassle of voluntaryregistration to be unnecessary.
This may not necessarily be the best course of action.
Presumably the charity will be paying rent for the use of the shop. Itis likely that the landlord will have opted to add VAT to the rentcharged. If so the charity will presently be absorbing this VAT as partof its costs.
The solution may be for the charity trustees to register on a voluntary basis, for VAT.
If this is done there will be no VAT to pay on the shop sales, asstated before these are zero rated; however it would now be possible torecover input tax charged to the charity for overheads specificallyrelated to the shop trade. This could include VAT on rent and otherdirect overheads, telephone etc.
One final tip for charities who pay VAT on their rents. If yourcharity is paying rents for a building, or part of a building which isused solely for charitable purposes (other than as an office or shop)the supply from the landlord may be exempt from VAT. Even if yourlandlord is required by other VAT rules to charge VAT on rents thiswould be the case. If you have been overcharged as a result you couldask your landlord, if justified, to send you a VAT credit backdatedthree years!