Readers' forum : Charitable event

I act for a big charity that recently held a very successful fundraising dinner. The income from the event was mainly exempt from VAT under the fundraising exemption rules but there were also three sources of zero-rated income: sales of merchandise (children’s T-shirts); advertising space was sold to a charity; and the speaker donated 20 copies of his autobiography which we sold on the night for £30 each. There was also a programme published for the event which we sold for £5 each.

Because there is both taxable and exempt income from the event I have treated all input tax on the costs of the event as ‘residual’ for partial exemption purposes and claimed a percentage of the input tax using the charity’s standard method percentage.

However my colleague in the tax department thinks that the speaker fee (£3 000 plus VAT) and catering costs (£20 000...