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.

Finance Update – What follows lockdown 3 for the Age UK Network?

Age UK’s Financial Governance Team has put together a summary document to help with the setting up of budgets and forecasts as we emerge from lockdown.

Whilst the country has been under the third national lockdown, Age UK’s Financial Governance Team has been developing and delivering a programme of financial guidance and support for Brand Partners as they face the upcoming exit from those restrictions, with charity shops able to open again from 12th April. The Financial Governance Team have put together a summary for Boards, CEOs and Finance Teams to help with the setting up of budgets and forecasts to cover the next 12–18 months. This guidance can be downloaded below. If you have any questions about this guidance please contact david.chenery@ageuk.org.uk.

Finance Network Meeting Recordings

Over the last few months, the Financial Governance Team has hosted a series of meetings to help with financial planning as we emerge from lockdown. The recordings of these meetings can be viewed in the document above or by visiting the Finance Section here.

EHRC Guidance: Retailers’ legal responsibility to disabled customers

The Equality and Human Rights Commission has released new guidance to help retailers to support disabled customers, which local Age UKs may wish to share in their local area.

New guidance from the Equality and Human Rights Commission (EHRC) aims to help retailers to provide better support disabled customers. The guidance explains how retailers should anticipate the needs of disabled customers and make reasonable adjustments so that they can shop online or in stores with confidence – especially for food and essential items. Local Age UKs may wish to share this guidance with retailers and other contacts in your local area.

The new guidance includes four steps:

  • Provide a service that meets the needs of all customers – anticipate, prepare and make reasonable adjustments for disabled customers.
  • Plan ahead to think about the needs of your disabled customers – consider and make changes to policies and procedures, as well as provide extra support and equipment, where necessary.
  • Communicate with your customers – inform customers about how they will be supported through a variety of ways such as easy to read signs and spoken announcements.
  • Train your staff – ensure that staff are supported with the right tools to help disabled customers, in line with the latest government guidelines on Covid-19.

Full details of the guidance can be found on the EHRC website.

Webinar: Employment, HR and Health and Safety during Covid-19

Stone King LLP are hosting a webinar to cover the employment, HR and health and safety implications of the Covid-19 pandemic for non-profit organisations.

A new webinar titled “Employment, HR and Health and Safety Covid-19 FAQs – Charities, Social Enterprises and Businesses” will take place this Thursday. This webinar will consider the Employment, HR and Health and Safety implications of the Covid-19 pandemic for non-profit organisations as they adjust to the ‘new normal’.

This webinar will be a live Q&A session during which Stone King LLP’s experts will answer as many of your current queries as possible on topics including:

  • The latest advice on shielding and risk assessments.
  • Employer obligations in relation health and safety.
  • How to manage the potential anxiety and challenges of employees returning to the workplace.
  • Avoiding and dealing with discrimination.
  • Furlough, flexible furlough and the need to restructure or make redundancies.

The webinar will take place on Thursday 23 July 2020 from 3 – 4pm.

Click here to register.

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

Two new training webinars available

There are two new online training courses that may be of interest to your staff and volunteers. The first course covers funding strategies and the second looks at using Ebay effectively.

There are two new online training courses that may be of interest to your staff and volunteers. The first course is organised by NCVO and aims to to help charities understand and analyse the current funding situation for their organisation and how to plan for the future. The second course comes from Charity Connect and explores how charities can us eBay most effectively. There is a beginners course and a more advanced session depending on your experience with the platform.

Funding strategy & diversification post Covid-19

NCVO is running an online course to help charities understand and analyse the current funding situation for their organisation and teach you how to plan for the future. Using key strategic tools and a funding strategy template (that you’ll adapt and tailor), the webinar will help you consider various sources of funding that are most suitable for your organisation including looking at diversification.

The webinar will take place on 5 August 10am – 3pm (with breaks). The pricing is based on the income level of your organisation.

For more information and to register, please click here.

Free training: Helping charities get the most from Ebay

Charity Connect is working with eBay to offer free training for Charities

If you’ve just started selling on eBay / are considering it or are a seasoned charity seller on eBay and want to know advanced tips in order to improve, there are free webinars for you!

Beginners Session

For beginners, a free 90 minute session will provide basic training to get you started on the best footing, and also make sure that you can maximise any selling you’re already doing. It’s useful not just for people running the eBay store, but also anyone who will be helping out.

The webinar will be delivered in bitesize chunks, with supporting materials to read after and plenty of time at the end for questions. It will cover:

  • Planning your workspace and logistics
  • Knowing how to set up on eBay for Charity
  • Creating great listings that generate clicks and sales
  • Working out how to get the best price for your items
  • Making sure you deliver great customer service.
Advanced Session

For the more advanced, a free 90 minute session will describe how to get the most out of eBay and how to scale your operations with ease. It will cover:

  • Next steps in logistics
  • Search Engine Optimisation
  • Marketing and promotional strategies
  • Using your supporters to help promote your sales
  • Advanced pricing strategies
  • Sourcing and selling multi-quantity items

There will be a long Q&A segment in this webinar so if you’re short on time, the content mostly will be delivered in the first half of the session. Supporting materials will be provided afterwards.

Both webinars will be hosted by eBay and eCommerce Expert Bert Bassett, who spent ten years working for eBay and is a successful Business Seller on the site.

For more information and to register, click here.

Updating information about your shops

We’re asking Brand Partners to help us keep the information we hold on their shops up-to-date so that we can signpost members of the public as accurately as possible.

Last week, we contacted Brand Partners that we know have shops to ask if they can check and update the information that we hold about those shops. This is to ensure we can make it clear to the public which local shops are open now and what the opening hours are so they don’t attempt to visit a local partner shop, only to find out it is closed at that time. Additionally, as you will know, Age UK has decided not to re-open a number of its shops so we want to make it clear to the public that our shop closures don’t affect any local partner shops.

If you have a shop / shops and haven’t heard from us directly, please fill in this form with your shop information so we can add the information to our directory and websites.

Film to support reopening of Age UK Shops

Age UK Retail have produced a short film explaining the practical measures taken to reassure customers that Age UK shops are Covid-19 secure.

Age UK Retail have produced a short film explaining the practical measures taken to reassure customers that Age UK shops are Covid-19 secure. Local partners may find the video a helpful resource to check steps they’ve taken in the reopening of their shops as well as a helpful promotional tool to host on your websites.

Any questions concerning the film can be directed to shirley.cooper@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

Political Update 10.06.20 – All shops in England can reopen from Monday

“Non-essential” shops can reopen from Monday 15th June as long as they complete a Covid-19 specific risk assessment and take the necessary steps to manage those risks. Meanwhile, the Job Retention Scheme closes to new entrants today.

Today Boris Johnson will announce plans to further ease lockdown restrictions in England. All shops in England can reopen from 15th June, as long as they are able to comply with the safety guidelines published by the Government. The guidance has been developed with input from industry, Public Health England, and the Health and Safety Executive.

All businesses intending to open must complete a Covid-19 specific risk assessment and take the necessary steps to manage those risks. Businesses should also demonstrate that they have put measures in place. Businesses which do not take steps to manage risks could face a range of actions, including the issuing of enforcement notices. Pubs, bars, restaurants and hairdressers will not be able to reopen until 4 July at the earliest. On businesses that must remain closed, such as those in the hospitality sector, new guidance would be published soon.

The Coronavirus job retention scheme closes to new entrants today.

The Treasury has said that parents on statutory maternity and paternity leave who return to work after the June cut-off date for furlough payments will still be eligible to be added to the scheme.

Guidance has been updated in Scotland indicating that individuals whom are shielding should continue to do so until the end of July, although from 18th June will be able to go outdoors to exercise whilst maintaining strict social distancing.

People in Wales are being asked to wear three-layer face coverings on public transport and other situations where social distancing is not possible.

The Department of Health and Social Care has rolled out Covid-19 testing to all care homes in England yesterday. This will cover all adult care homes for under-65s, including those with learning disabilities or mental health problems will be offered testing, regardless of whether residents have symptoms. The new Social Care Sector Covid-19 Support Taskforce has been set up to continue supporting the care sector and prevent further transmission.

The DHSC have set out guidance for the infection control measures that the Adult Social Care Infection Control Fund will support. The fund is worth £60om and its main purpose is to support adult social care providers and help minimise transmission between care homes. It will also go towards helping domiciliary care providers and the wider workforce. The full guidance can be read here.

The Chancellor has sent a letter to Lord Forsyth of Drumlean, the Chair of the Lords’ Economic Affairs Committee, in response to its report on the future of social care funding following the evidence session on 19 May. The Chancellor accepts the need for a long-term action plan for social care, putting it on a sustainable footing. Sunak reaffirms the Government’s commitment to ensure everyone has access to the care and support that they need, but there should be a principle of shared responsibility and people should expect to contribute to the cost of their care. The Chancellor writes that the report will be considered amongst other reports that have been published in recent years, which suggest various approaches to reform. Sunak reiterates the steps taken by the Government to seek cross-party views from MPs and Peers and these talks will take place at the earliest opportunity.

Influencing action

We are working closely with Carers UK on this year’s Carer’s Week, taking place this week. Friday (12th June) will be specifically focused on older carers. Carers UK has created materials and a guide on how to hold virtual events and Age UK has produced some template tweets for you to use if you wish. They can all be found here. You can find out more about Carers Week at www.carersweek.org

The Domestic Abuse Bill continues Committee stage in the House of Commons this week. We have sent briefings to all members of the Committee and are arranging meetings to urge the Government to include our asks in the Bill. You can read more about our work on the Bill here: https://www.ageuk.org.uk/our-impact/campaigning/no-age-limit/

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

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