7th September 2008, 11:17 AM
Quote:quote:Originally posted by voice of reason
To try to answer your question
Also, I'm not sure about the VAT registered bit. Are the company arms of charities (archaeological or otherwise) excempt from being VAT registered?
Slightly off-topic but needs to be nipped in the bud.
No, charities are VAT-Registered (unless very small) - the VAT issue refers to the legal position that charities don't need to charge VAT to certain categories of body (other charities, certain designated public entities, but nowhere actually defined as adefinitive list). The problem alluded to is deciding whether they are exempt or not. If you get it wrong and don't charge VAT when you should, HMRC still want their cash, so that concentrates the mind. The other issue is that some of these entities actually [u]do</u> want you to charge them VAT due to certain technical issues of their own regarding VAT offset, and that adds another dimension of complication.
This whole thing is not a benefit to the charity issuing the invoice by the way. In terms of cashflow it is a pain in the backside - the way VAT works is you collect cash in on behalf of the Exchequer, while on VAT on your invoiced sales, you pay cash out. The ideal is balance each quarter, which is when VAT liability is assessed. However if you don't gather the same as you pay out, then you are responsible for the difference. The less VAT you charge, the greater your net outflow to Mr Darling's pockets.
The simple answer is that it is far easier (for simple brains and for accounting purposes) for charities to work for commercial clients rather than public sector!
Clear? I doubt it somehow, but that is how VAT operates.
I understand only too well how VAT operates, and following your answer I consider myself lucky not to have to run the VAT return for a charity as it is far easier for a limited company (I don't think I've come across any cases yet where we are excempt from charging VAT).
This perhaps feeds back into my earlier point about Charities (potentially) needing far more admin staff just to keep on top of this very type of thing, meaning that any additional money that might be made as a charity (and I stress 'might') being spent there rather than benefitting the poor old diggers.
The difficulty with all of this is that it is so complex and organisations operate in some many ways that it is impossible to be familiar with all of them (unless you are able spend a lot of time looking at it - I've got better things to do, like attempting to earn a living, and watching paint dry). Connecting to the IFA revue thread, perhaps they should carry out some sort of revue of the way these things operate, where there are balances, whether directors are taking too much, whether some organisations have advantages, etc.