TaxCorporate TaxCharities hit by European VAT ruling

Charities hit by European VAT ruling

Charities face paying a cross-border VAT rate higher than 17.5% following a ruling by the ECJ

european flag

Charities could face paying a VAT rate higher than 17.5%, following a
European Court of Justice
ruling.

The case, relating to the
Swedish
Council for Redundancy Support and Advice
, means that on cross-border
transactions, charities will have to provide their VAT registration details to
avoid paying the other member state’s rate of VAT.

The UK has one of the lower rates of VAT at 17.5%, but in Scandinavia rates
applied can be up
to 25%.

According to Marc Welby, VAT partner at
BDO Stoy Hayward,
charities often pay for advertising campaigns across borders.

‘By and large, it will be the not-for-profit sector that will be affected by
this. The only sector where VAT planning is going on is the charities sector,’
he said.

Welby said if the customer fails to provide their VAT registration number to
the supplier in the member state they will subsequently be charged the supplying
countries’ rate of VAT.

It is thought UK authorities will now be forced to alter UK VAT law, with
charities that had planned to avoid VAT charges now unwinding offshore
arrangements.

The decision is expected to be welcomed by professional service
practitioners, including accountants, as it eliminates the need to consider
whether a VAT-registered client is receiving the supply for business purposes.

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