Finance Update: VAT Guidance

Our VAT Helpline provider Crowe has published some guidance on VAT which may be useful.

At the end of March, our VAT Helpline provider Crowe UK LLP published insights on common trading activity VAT issues for charities in 2021. The following are a couple of the key topics flagged that we thought would be of particular interest to colleagues in the network, whether you are VAT registered or involved in VAT-exempt/non-business activities that also undertake trading activities such as sales from charity shops, cafes and other social enterprise activities.

VAT Issues:
  1. Donated Goods Retail Gift Aid Scheme and VAT

    The Retail Gift Aid scheme is used by many charities in order to treat what would have been the sale of donated goods as donations of cash by acting as agent for the owners in selling their goods. This enables the charity to be able to claim Gift Aid.  

    It is important to note, that from a VAT perspective, this changes the nature of the transaction entirely. If donated goods are sold, the shop is making a zero-rated taxable business activity which enables VAT recovery on associated costs. Whereas, if a charity is selling goods on behalf of someone in return for a donation, this is a ‘non-business activity’ and so while there is no VAT due on the donation, VAT cannot be recovered on the associated costs.  

    This can result in the shop being required to apply an apportionment to arrive at the correct amount of VAT recoverable in relation to the shop costs so VAT administration increases and VAT recovery is reduced.

    Solution: To properly operate the scheme, the charity should charge a VAT bearing commission to the donor of the goods. This does mean a small amount of VAT being paid to HMRC but VAT on associated costs incurred on the shops can be recovered in full.

    Further note on donated goods: Please note that the zero-rating can only apply to donated goods sold in their current state and some repair works/painting would be allowed. Where items are ‘upcycled’ e.g., donated pallets turned into garden storage units, the standard rate of VAT must be applied to sales.

  2. Effect of COVID-19 on VAT recovery rates

    The COVID-19 pandemic has resulted in many charity shops, cafes and social enterprise activities to close temporarily. This could have an impact on the amount of VAT recoverable on overhead costs, particularly where the charity uses an income-based apportionment as the proxy for recovery (e.g., the standard method of partial exemption). This is because taxable income has been reduced while exempt income may have remained constant. For example, care services in general will have continued during lockdown, while shops/cafes and conference venues have remained closed.

    Solution: Apply to HMRC to agree an alternative recovery method for the year. HMRC has released an information sheet which states it will look at these requests sympathetically and has set up a purpose-built inbox to review these applications. We would suggest that charities review their recovery rates to see if there has been, or will be (using a forecast), a heavy reduction input tax recovery so this can be addressed. HMRC’s release can be accessed here.

Should there be sufficient interest from across the sector, Crowe have indicated they will look to record a 10-minute webinar providing more detailed information on this subject. Please register your interest here

Further information

Please contact the Age UK VAT Helpdesk on 0207 842 7499 or AgeukVAT@crowe.co.uk or your usual professional contact if you wish to discuss any of the above issues further.

Shared with thanks to Crowe UK LLP.

Face masks and coverings guidance – July 2020

Face masks and coverings will become mandatory in shops across England from 24 July.

England

Wearing a face covering in shops and supermarkets in England is to become mandatory from 24 July. Those who fail to comply with the new rules will face a fine of up to £100, although children under 11,  those with certain disabilities and retail staff will be exempt.

You can read more here.

Northern Ireland

Stormont’s Infrastructure Minister Nichola Mallon has said she supports the use of face coverings in shops in Northern Ireland. Wearing a face covering in shops will become mandatory in England from 24 July, but in Northern Ireland it is only compulsory on public transport.

Northern Ireland’s hotels, bars, restaurants and cafes reopened on 3rd July.

Scotland

As of Friday 10th July, wearing a face covering is compulsory  in shops across Scotland. Scotland First Minister  Nicola Sturgeon said on Tuesday that there was ” extremely high” compliance with  new regulations for face masks in Scotland. This comes after police issued no fines over the weekend. Face coverings are already compulsory on public transport in Scotland.

In Scotland, pubs and restaurants reopened for indoor trade on Wednesday 15th July, a week on from the successful reopening of beer gardens and outside seating.

Wales

Three-layer face coverings will be mandatory on public transport in Wales from 27th July, the first minister Mark Drakeford has said.

Pubs, bars, restaurants and cafes reopened on Monday 13th July in Wales. However, unlike England they are only allowed to serve customers outdoors, meaning many will be unable to reopen.

If you would like any more information, please contact alison.trew@ageuk.org.uk or robert.henderson@ageuk.org.uk

Age UK Retail adds additional resources to support reopening of shops

In response to demand, Age UK Retail have added a series of posters to the resource pack to help local partners to recommence trading.

Thank you to everyone who responded to yesterday’s article covering the resources produced by Age UK Retail to help local partners to recommence trading. The Retail Team received a number of questions and in response have uploaded some additional resources including posters for use in store covering: maximum numbers of shoppers; one way systems; and much more.

These resources are available to download here.

These resources also include a shop Risk Assessment which all shops are advised to complete, along with training modules for staff and volunteers to complete before trading. Any questions about the resources or more generally about shop trading can be directed to Shirley Cooper, Retail Local Partner Liaison Manager – shirley.cooper@ageuk.org.uk

Age UK Retail release resources and training to support reopening of shops

As lockdown starts to ease, some local partners may find these Age UK Retail resources helpful as they prepare to recommence trading.

Age UK Retail have produced some resources that local partners may find helpful as they prepare to recommence trading. Resources include a shop Risk Assessment which all shops are advised to complete, along with training modules for staff and volunteers to complete before trading. Any questions about the resources or more generally about shop trading can be directed to Shirley Cooper, Retail Local Partner Liaison Manager – shirley.cooper@ageuk.org.uk

Click here to download the resources

Political Update 26.05.20 – Government sets target date to re-open certain shops

The government aims to allow “non-essential” retail shops to re-open from the 15th June as long as they pass certain criteria.

At yesterday’s press conference the Prime Minister, Boris Johnson, announced that from 15th June, the government intends to allow all non-essential retail in England, ranging from department stores to small independent shops to re-open, contingent upon progress against the five tests, and only permitted for those premises which are able to meet the Government’s guidelines on making shops safe. The government is publishing new guidance for the retail sector.  Shops must implement this guidance before they re-open.  

Last week the Department of Health and Social Care announced £22m of funding for health charities during the coronavirus outbreak. Over £22 million will be awarded to charities providing services to a range of people with specific health conditions and to carers.

Influencing action

You can find an archive of all of the emails the External Affairs team has sent to MPs since the start of the pandemic here: www.ageuktheloop.com/mp-emails/

We are working closely with Carers UK on this year’s Carers’ Week. It will take place from 8th-14th June and the Friday (12th June) will be specifically focused on older carers. Carers UK are creating materials and a guide on how to hold virtual events (both online and offline) which we will share as soon as we receive them. In the meantime you can find out more about Carers Week at www.carersweek.org

The External Affairs team is running a survey on the experience of those receiving and giving care during the covid-19 crisis. If you are operating in one of the following Local Authorities, please do respond to the survey or share this tweet so that we can see how the easements in the Care Act are affecting those giving and receiving care during the covid-19 crisis:

  • Birmingham City Council
  • Coventry City Council
  • Derbyshire County Council
  • Middlesbrough Council
  • Solihull Metropolitan Borough Council
  • Staffordshire County Council
  • Sunderland City Council
  • Warwickshire County Council

We are preparing evidence for the Treasury Select Committee on the economic impact of the Government’s measures to support organisations through Coronavirus – some Age UKs are helpfully providing information about their financial situations to support our evidence.

Age UK Retail Guide to Managing Social Distancing and Safeguarding

Colleagues in Retail have produced guidance on social distancing and safeguarding the health of employees, volunteers and customers – including a shop opening checklist.

Colleagues in Retail have prepared some resources to support shop staff preparing to re-open Age UK shops. These resources are being shared with local partners to support their own preparations. The guidance outlines best practice to social distance and safeguard the health of employees, volunteers and customers, and includes a shop opening checklist.

Download the full guidance and the shop re-opening checklist below:

Government Retail, Hospitality & Leisure Grant Fund

Government Grants of up to £25,000 to support retail, hospitality and leisure businesses may be available for local Age UKs.

Local Age UKs with retail and hospitality operations may be eligible to claim up to £25,000 of grant aid from the Government’s Retail, Hospitality and Leisure Grant Fund (RHLGF).

You can get this grant (per property) if your business is a:

  • shop
  • restaurant 
  • cafe
  • drinking establishment
  • cinema
  • live music venue
  • assembly or leisure venue
  • hotel
  • guest or boarding premise
  • self-catering accommodation

Grant allocation will vary depending on the rateable value of the business

  • £15,000 or less will get a grant of £10,000
  • between £15,001 and £51,000 will get a grant of £25,000

Local Authorities will be responsible for delivering the funding to eligible businesses. Central government will fully reimburse Local Authorities for the cost of the grants.

The scheme forms part of the Government’s package of support for businesses, including the Small Business Grant Fund announced by the Chancellor on 11 March 2020.

Click here for more information, including eligibility and how to apply.

Age UK has recently applied for the RHLGF grants for its shops and can provide first-hand experience of applying to the scheme. If you would like to find out more about what’ve learnt utilising the scheme, please email covid-19enquiryline@ageuk.org.uk

Have you been successful in securing a grant?

We want to learn about your experience is applying to the Government’s emergency grant schemes. Get in contact at covid-19enquiryline@ageuk.org.uk

Age UK Lindsey have successfully secured funding for their shops. CEO, Andy Storer said…

“We’ve received £10K per shop from West Lindsey District Council. It was an easy process and was paid within 48 hours of making the claim. We have sought the same grants in East Lindsey and North Lincolnshire, offering relief of £100K for our 10 shops and this could be a ‘game changer’ for us in this time of crisis”.

Andy Storer, CEO, Age UK Lindsey

Keeping your properties safe and secure

Download the property loss prevention guide – a checklist for keeping your property safe while it is empty.

As many partners are closing or have closed a number of their premises, we wanted to share this checklist to help you keep your property safe and secure at this time.

Please note, in all instances you would need to check with your insurers about the level of cover in place, especially if there are any clauses re insurance not applying if a premises remains empty for a certain number of weeks.

Association of British Insurers Motor and Home Insurance Pledges

The ABI (Association of British Insurers) is reassuring people that its motor and home insurance members are offering enhanced help and support to all their customers who may be affected by the impact of coronavirus.

The spread of Coronavirus (COVID-19) is unprecedented in modern times and we understand this is an incredibly difficult time for families and businesses. Insurers want to support those who are affected by the impact of COVID-19, as well as those who want to help their communities in these challenging times.

The Association of British Insurers (ABI) motor and home insurers have pledged to:

  • Support those who need to make a claim. Insurers have implemented business continuity plans and work closely with service providers to do everything possible in these challenging circumstances to continue to handle claims and support their customers.  We recognise there will be many customers who will need additional support and insurers will prioritise those in vulnerable circumstances.
  • Support those who are working from home. If you are an office-based worker and need to work from home because of government advice or because you need to self-isolate, your home insurance cover will not be affected. You do not need to contact your insurer to update your documents or extend your cover.
  • Support those who cannot work from home. If you have to drive to your workplace because of the impact of COVID-19, your insurance policy will be valid. You do not need to contact your insurer to update your documents or extend your cover.
  • Support those who use their cars to help their communities. If you are using your own car for voluntary purposes to transport medicines or groceries to support others who are impacted by COVID-19, your cover will not be affected. You do not need to contact your insurer to update your documents or extend your cover.
  • Support our key workers. If your work* is critical to the national response to COVID-19 and you need to use your own car to drive to different locations for work purposes because of the impact of COVID-19, your cover will not be affected. You do not need to contact your insurer to update your documents or extend your cover.

*everyone who works in one of the critical sectors listed by the government.

Association of British Insurers
20 March 2020