This year’s Budget contained at least one bit of good news that everyone seems to be happy about.
After a long and hard-fought lobbying effort, the UK’s 25 air ambulance charities were finally successful in obtaining relief from VAT on their fuel costs.
What is interesting is the way in which the relief has been granted.
It is a basic principle of the current UK VAT system that the existing provisions we have to zero-rate certain items (e.g. books, basic foodstuffs, kids’ clothes etc.) cannot be extended. The reason is that, whilst the UK was able to negotiate with the European Union to retain our existing zero-rates, there is no scope for them to be extended.
So, how has the Chancellor found a way round this?
The answer is that instead of the air ambulances being able to purchase fuel VAT-free, they will continue to pay VAT when they buy fuel but this will be reimbursed to them by way of an annual grant.
A similar approach has previously been taken in respect of a number of charity records where the VAT which the charity has had to pay over on the sale of the single has subsequently been reimbursed by the Treasury.
It will be interesting to see if other parts of the charity sector start to lobby for relief on a similar basis and, more importantly, if the Chancellor is able to find a way of helping them to get relief for some of the VAT they pay on their costs.
If your charity needs help making the most of the VAT reliefs available to it, please give us a call.