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Warning over charity cash; TAX: Fears voluntary groups could miss out on VAT windfall.

Byline: By Chris Morley

CHARITIES could miss out on a possible VAT windfall if they fail to act quickly enough.

A High Court test case has opened the way for voluntary organisations to win back cash which previously went into the Treasury's coffers.

Specialists at the city offices of Grant Thornton said the potential for refunds came after HM Revenue and Customs issued guidance following the watershed judgment over the way VAT was treated on the costs incurred in fundraising.

James Hurst, senior indirect taxes manager, said: "In the past, fundraising was considered as a 'non-business activity' which meant that VAT incurred on the related costs was not recoverable.

"However, the UK High Court has overturned a previous tribunal decision and found in favour of the Church of England Children's Society. "As a result, if funds that are raised are used directly or indirectly to finance taxable business activities, charities are entitled to recover the related VAT.'

The ruling means that where a charity uses the funds it raises to support its various activities, the VAT incurred can now be recovered to the extent that the funds raised will support taxable business supplies.

The decision followed on the heels of a European Court of Justice ruling where it was held that if fundraising was for the purpose of the business's economic activity VAT was recoverable because the taxable person was making taxable supplies.

Mr Hurst said: "As with most types of refund opportunities, certain eligibility criteria need to be met. For example the recovery of input tax depends upon whether business supplies are taxable or exempt
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Title Annotation:Business
Publication:Birmingham Mail (England)
Date:Nov 15, 2005
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