Charity donations / VAT
Discussion
As with anything to do with VAT it's far from simple. See:
Section 5.9 - https://www.gov.uk/government/publications/vat-not...
Section 24 - https://www.gov.uk/government/publications/chariti...
Also - https://www.theguardian.com/society/2009/dec/15/ch...
The answer is probably Samuel Goldwyn's 'definite maybe'.
If so, the charity may well not be receiving the full amount you donated.
For exactly that reason, I would never make one through a third party.
Especially a business which may be getting some benefit out of it.
Any donation I make is always direct and I Gift Aid* it as well.
That way the charity receives more than my £X rather than less.
Anyone who wants to support CIN should consider doing it this way.
http://www.bbc.co.uk/programmes/articles/1htCr816q...
* The only stipulation to qualify for Gift Aid is that you must pay Income Tax.
See paragraph 7 of the CIN T&Cs.
Section 5.9 - https://www.gov.uk/government/publications/vat-not...
Section 24 - https://www.gov.uk/government/publications/chariti...
Also - https://www.theguardian.com/society/2009/dec/15/ch...
The answer is probably Samuel Goldwyn's 'definite maybe'.
If so, the charity may well not be receiving the full amount you donated.
For exactly that reason, I would never make one through a third party.
Especially a business which may be getting some benefit out of it.
Any donation I make is always direct and I Gift Aid* it as well.
That way the charity receives more than my £X rather than less.
Anyone who wants to support CIN should consider doing it this way.
http://www.bbc.co.uk/programmes/articles/1htCr816q...
* The only stipulation to qualify for Gift Aid is that you must pay Income Tax.
See paragraph 7 of the CIN T&Cs.
Donations to charities are outside the scope of VAT. Sometimes there is uncertainty about whether a donation is a donation or not and that can mean that there is a question over the VAT treatment.
From your description the VAT treatment seems wrong to me. The £1 you have was not for a service from Costa and should not appear as such. It was a donation to charity and no different from if you have paid cash and dropped a pound of change into a charity tin next to the till.
From your description the VAT treatment seems wrong to me. The £1 you have was not for a service from Costa and should not appear as such. It was a donation to charity and no different from if you have paid cash and dropped a pound of change into a charity tin next to the till.
Esceptico said:
Donations to charities are outside the scope of VAT. Sometimes there is uncertainty about whether a donation is a donation or not and that can mean that there is a question over the VAT treatment.
From your description the VAT treatment seems wrong to me. The £1 you have was not for a service from Costa and should not appear as such. It was a donation to charity and no different from if you have paid cash and dropped a pound of change into a charity tin next to the till.
I have emailed the UK MD of Costco and tweeted to it as well asking the questionFrom your description the VAT treatment seems wrong to me. The £1 you have was not for a service from Costa and should not appear as such. It was a donation to charity and no different from if you have paid cash and dropped a pound of change into a charity tin next to the till.
I expect CIN to receive every penny of every pound pledged by this route and will be kicking up a stink if that doesn't happen
From what the OP said it would appear that the £1 on his receipt is separately itemised (including the VAT breakdown) from that of whatever goods he bought at Costco. The company is a major supporter of CIN and has been involved with it for 20 years. If, as is quite possible, there is a sponsorship agreement in place between it and CIN that could have tax implications (VAT and CT) for Costco, so that may be one reason for the split. An auditable accounting trail within the company will be needed.
In reality though there is no reason to get hung up about the VAT treatment by Costco because it makes
all difference to the OP. As as an unregistered consumer, he can't claim it as Input Tax from HMRC. What does matter to him, as he has stated, is how much of his money is actually being paid over to CIN. That will depend on what the deal is between the company and the charity. It could well be paying over the equivalent gross amount from each till receipt (and more). Corporate donations to charity are offsetable against business profits when calculating CT liability. Win/win.
Watching with interest to see what explanation he receives from the company MD.
In reality though there is no reason to get hung up about the VAT treatment by Costco because it makes
all difference to the OP. As as an unregistered consumer, he can't claim it as Input Tax from HMRC. What does matter to him, as he has stated, is how much of his money is actually being paid over to CIN. That will depend on what the deal is between the company and the charity. It could well be paying over the equivalent gross amount from each till receipt (and more). Corporate donations to charity are offsetable against business profits when calculating CT liability. Win/win.Watching with interest to see what explanation he receives from the company MD.
JPJPJP said:
Esceptico said:
Donations to charities are outside the scope of VAT. Sometimes there is uncertainty about whether a donation is a donation or not and that can mean that there is a question over the VAT treatment.
From your description the VAT treatment seems wrong to me. The £1 you have was not for a service from Costa and should not appear as such. It was a donation to charity and no different from if you have paid cash and dropped a pound of change into a charity tin next to the till.
I have emailed the UK MD of Costco and tweeted to it as well asking the questionFrom your description the VAT treatment seems wrong to me. The £1 you have was not for a service from Costa and should not appear as such. It was a donation to charity and no different from if you have paid cash and dropped a pound of change into a charity tin next to the till.
I expect CIN to receive every penny of every pound pledged by this route and will be kicking up a stink if that doesn't happen
s2kjock said:
I suspect what is on the receipt comes from how their till system is set up but that the full amount will go to the charity. The VAT return will be adjusted accordingly.
The receipt should have showed it as "exempt" rather than standard-rated. Based on what OP has said it sound like CIN will get 83p and HMRC will get 17p.One way around it (I suppose) would be for CostCo to identify all CIN "sales" and then gross them up to include VAT, before handing it over to CIN.
berlintaxi said:
Translates as I have no life, if you are that bothered about Children in need receiving funding how much did you give aside from this donation?
Wow!! That's one hell of a comment to make about the biggest charitable event of the year. Are you serious or pissed? Major retailer siphons off 20% of donations for their bottom line and all you can say is 'Get a life'?Words fail me...
OK, a nice quick reply from Costco
The donation isn't actually a donation, it is the purchase of a Pudsey pin, which is a standard rated VAT item.
Costco pays over the VAT to HMRC, but does make up the difference, so that for every Pudsey pin sale transacted, CiN does receive £1
The way the question was posed at the checkout could be better, but overall I think the intent of Costco and the actual donation to CiN is sound.
The donation isn't actually a donation, it is the purchase of a Pudsey pin, which is a standard rated VAT item.
Costco pays over the VAT to HMRC, but does make up the difference, so that for every Pudsey pin sale transacted, CiN does receive £1
The way the question was posed at the checkout could be better, but overall I think the intent of Costco and the actual donation to CiN is sound.
JPJPJP said:
OK, a nice quick reply from Costco
The donation isn't actually a donation, it is the purchase of a Pudsey pin, which is a standard rated VAT item.
Costco pays over the VAT to HMRC, but does make up the difference, so that for every Pudsey pin sale transacted, CiN does receive £1
The way the question was posed at the checkout could be better, but overall I think the intent of Costco and the actual donation to CiN is sound.
Aha. As I suspected, part of a promotional/sponsorship exercise.The donation isn't actually a donation, it is the purchase of a Pudsey pin, which is a standard rated VAT item.
Costco pays over the VAT to HMRC, but does make up the difference, so that for every Pudsey pin sale transacted, CiN does receive £1
The way the question was posed at the checkout could be better, but overall I think the intent of Costco and the actual donation to CiN is sound.
Lapel pins/badges are zero rated, not standard: see Sections 8.1 & 8.2 - https://www.gov.uk/government/publications/vat-not...
However that relates to supplies made by the charity* itself to the end user, not by a third party 'pig-in-the-middle' like Costco.
Its sale will be subject to sponsorship and retail trading VAT rules.
VAT is the most complicated and arcane UK tax imaginable. A very good friend of mine is a retired senior HMRC inspector.
I visited his office once in a professional capacity and the extent of the manuals/supporting material on the shelves was truly staggering.
Rows and rows of it. (Far less of it was kept in digital form back then).
* All Pudsey branded items are channelled through CiN's trading arm - https://beta.companieshouse.gov.uk/company/0246103...
As always, the answer is not a simple black and white yes or no. It depends... See:
https://www.gov.uk/government/publications/vat-not...
and
https://www.gov.uk/government/publications/chariti...
Many charities (certainly all of the large ones) undertaking trading activities which will be done via a completely separate limited company.
This will covenant profits back to the main charity. In some cases this will be exempt from CT.
My final 12 years before retirement were spent in Third Sector accounting.
https://www.gov.uk/government/publications/vat-not...
and
https://www.gov.uk/government/publications/chariti...
Many charities (certainly all of the large ones) undertaking trading activities which will be done via a completely separate limited company.
This will covenant profits back to the main charity. In some cases this will be exempt from CT.
My final 12 years before retirement were spent in Third Sector accounting.
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