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01 April 2014
A charity that is not VAT-registered is considering a building project using a VAT-registered trading subsidiary
Our client is a charity that is not VAT-registered. It is considering whether to undertake a building project using a VAT-registered trading subsidiary with the aim that this will enable the VAT on professional fees to be recovered. Our basic thoughts are as follows.
- If a charity engages the professionals directly the charity would have to pay VAT on their fees and would not be able to reclaim.
- If the subsidiary engages the professionals and is VAT-registered it could reclaim.
- The subsidiary charges a management fee for the project to the charity on which VAT applies.
- If the management fee and its VAT are of the same level as the professional fees overall no net VAT could be recovered.
- If the management fee were smaller the charity’s payment of...
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