5th September 2008, 11:48 PM
To try to answer your question
Also, I'm not sure about the VAT registered bit. Are the company arms of charities (archaeological or otherwise) excempt from being VAT registered?
Slightly off-topic but needs to be nipped in the bud.
No, charities are VAT-Registered (unless very small) - the VAT issue refers to the legal position that charities don't need to charge VAT to certain categories of body (other charities, certain designated public entities, but nowhere actually defined as adefinitive list). The problem alluded to is deciding whether they are exempt or not. If you get it wrong and don't charge VAT when you should, HMRC still want their cash, so that concentrates the mind. The other issue is that some of these entities actually [u]do</u> want you to charge them VAT due to certain technical issues of their own regarding VAT offset, and that adds another dimension of complication.
This whole thing is not a benefit to the charity issuing the invoice by the way. In terms of cashflow it is a pain in the backside - the way VAT works is you collect cash in on behalf of the Exchequer, while on VAT on your invoiced sales, you pay cash out. The ideal is balance each quarter, which is when VAT liability is assessed. However if you don't gather the same as you pay out, then you are responsible for the difference. The less VAT you charge, the greater your net outflow to Mr Darling's pockets.
The simple answer is that it is far easier (for simple brains and for accounting purposes) for charities to work for commercial clients rather than public sector!
Clear? I doubt it somehow, but that is how VAT operates.
Also, I'm not sure about the VAT registered bit. Are the company arms of charities (archaeological or otherwise) excempt from being VAT registered?
Slightly off-topic but needs to be nipped in the bud.
No, charities are VAT-Registered (unless very small) - the VAT issue refers to the legal position that charities don't need to charge VAT to certain categories of body (other charities, certain designated public entities, but nowhere actually defined as adefinitive list). The problem alluded to is deciding whether they are exempt or not. If you get it wrong and don't charge VAT when you should, HMRC still want their cash, so that concentrates the mind. The other issue is that some of these entities actually [u]do</u> want you to charge them VAT due to certain technical issues of their own regarding VAT offset, and that adds another dimension of complication.
This whole thing is not a benefit to the charity issuing the invoice by the way. In terms of cashflow it is a pain in the backside - the way VAT works is you collect cash in on behalf of the Exchequer, while on VAT on your invoiced sales, you pay cash out. The ideal is balance each quarter, which is when VAT liability is assessed. However if you don't gather the same as you pay out, then you are responsible for the difference. The less VAT you charge, the greater your net outflow to Mr Darling's pockets.
The simple answer is that it is far easier (for simple brains and for accounting purposes) for charities to work for commercial clients rather than public sector!
Clear? I doubt it somehow, but that is how VAT operates.