VAT - Charity sales zero-rating or exempt??

KatieR

I am looking for some help regarding a new client of mine. They are a community centre registered as a charity whoes main activity is the hiring out of rooms in their building for the use of the community. For example they hire out rooms weekly to a dramatic society and to an individual who runs a life drawings club. Some clients are regular and some are one off clients.

They are registered for VAT and have been zero rating their sales (the lettings of the rooms) and then claiming back VAT on their purchases. I do not see how these services can be zero rated. I am in the mind set that the sales are exempt as they are hiring out space in a building as detailed in HMRC Notice 701/1 Charities.

I have checked The Value Added Tax Act 1994 Section 30 zero-rates goods and services listed in Schedule 8 and cannot relate these services to the community centres services. The previous bookkeeper is insisting that the sales are zero rated.

Thank you so much if you are able to offer any help on this. :001_smile:

villapb

Hi Katie
Their invoices should be split to show how much is charged for Room Hire, Accommodation, Equipment Hire, Refreshments, and Meals. VAT should then only be charged on those elements attracting VAT, see below:
Room Hire element of the invoice is exempt from VAT
Equipment Hire element is VATable (standard rated)
Refreshments such as tea and coffee with biscuits may also be exempted from VAT when charged at an inclusive rate.
Meals are VATable (standard rated)

KatieR

Thank you! This is exactly how I thought it should be done! :001_smile: