A guide to third sector trading - WCVA

It’s an idea, but is it business? A guide to third sector trading
1: Getting
started
2: First steps 3: Business
planning
4: Legal and
governance
5: Funding
and
resourcing
6: Financial
controls
7: Managing
growth
8: Management
and
governance
9: Social
enterprise
10: Sources
of support
• Registration below the threshold: Registration is optional for
businesses with lower levels of turnover. This is of benefit for
small enterprises which are involved in zero-rated activities such
as newspaper and book publication – since they can reclaim the
VAT spent on raw materials.
• VAT accounting: VAT registration demands that companies keep
detailed records in their regular accounts. This includes VAT paid
on all purchases and VAT charged on all sales. They must make
periodic VAT returns detailing total payments and receipts. Since
goods and services are charged at various rates, including zero,
the accounts system needs to be robust enough to produce
reports simply and quickly when they are needed.
VAT and building projects: Many voluntary organisations which
are grant-funded to carry out building work are understandably
confused by the way VAT affects them, and they can lose tens of
thousands of pounds if they do not take it into consideration. It is
essential that you:
• study the guidance from funders on VAT at the time when you
apply for grants
• check out the VAT implications of your funding and your future
operations when your grant is awarded; there could be plenty of
time to change your VAT registration status if that is needed, but
don’t wait until you have spent the money in case there are more
serious problems
• get information from HM Revenue and Customs (live officers
to speak to may be hard to reach nowadays, but there are
comprehensive information packs and details on the HMRC web
site)
• talk to your accountant or a VAT specialist to see whether you
might lose out when you spend the grant – one or two hundred
pounds for a consultation is worth it just to put your mind at
rest, and could literally save you a fortune.
VAT and charities:
• You may often encounter the misconception that charities do
not pay VAT – this is incorrect – charities do pay VAT like most
organisations, although they enjoy certain limited benefits.
• These take the form of zero rated (i.e. chargeable to VAT but
at 0%) or exempt, and include concessions on certain charity
fundraising events, sale of donated goods, certain types of
construction projects, disability aids, advertising etc. Check that
you are not charged VAT at the standard rate on these items.
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