VAT and Cat Rescue

[covcats]

Hi all,

we are a small cat rescue and homing charity with a typical spend of about 25K per year - mainly vets, food and litter.
we have been told of a recent ruling made for another charity -


"TC01653: Three Counties Dog Rescue
LNB News 11/01/2012 69 Published Date: 11 January 2012
Jurisdiction: England; Northern Ireland; Scotland; Wales England; Northern Ireland; Scotland; WalesCitation: [2011] UKFTT 817 (TC) Decision Date: 12 December 2011 Court: First-tier Tribunal (Tax) Judges: Lady Mitting Decision: Appeal allowed Representation: Philip Luty; Bernard Haley Catchwords: VAT - Charities - VAT - Charities - Abstract
Zero rating- transfer of ownership of dogs by animal charity in return for a 'donation' - was the donation consideration for the transfer - yes - was the Appellant making a taxable supply - yes - appeal allowed.
where
1. Three Counties Dog Rescue ('TC') was appealing against the decision of the Commissioners dated 20 July 2010 to refuse its application to register for VAT with effect from 1 April 2006 and to refuse repayment of an input tax claim of £61,939.

and

20. We find that the Appellant, in its supply of dogs to new owners, was making zero rated taxable supplies, thus entitling it to register for VAT and to recover its input tax. The appeal is therefore allowed.

We registered for gift aid last year and this is applied to donations but not homing 'donations' which we have always set at a minimum (currently £75 per cat). I assume this means that we can register for VAT and also claim back VAT on our expenditure?

Are there any downsides to registering for VAT?

We have no accountant or tax advisors as we are such a small outfit - its just me, a free software package and co-ercing someone to audit out accounts!

Thanks

[Generix]

Hi all,

we are a small cat rescue and homing charity with a typical spend of about 25K per year - mainly vets, food and litter.
we have been told of a recent ruling made for another charity -


"TC01653: Three Counties Dog Rescue
LNB News 11/01/2012 69 Published Date: 11 January 2012
Jurisdiction: England; Northern Ireland; Scotland; Wales England; Northern Ireland; Scotland; WalesCitation: [2011] UKFTT 817 (TC) Decision Date: 12 December 2011 Court: First-tier Tribunal (Tax) Judges: Lady Mitting Decision: Appeal allowed Representation: Philip Luty; Bernard Haley Catchwords: VAT - Charities - VAT - Charities - Abstract
Zero rating- transfer of ownership of dogs by animal charity in return for a 'donation' - was the donation consideration for the transfer - yes - was the Appellant making a taxable supply - yes - appeal allowed.
where
1. Three Counties Dog Rescue ('TC') was appealing against the decision of the Commissioners dated 20 July 2010 to refuse its application to register for VAT with effect from 1 April 2006 and to refuse repayment of an input tax claim of £61,939.

and

20. We find that the Appellant, in its supply of dogs to new owners, was making zero rated taxable supplies, thus entitling it to register for VAT and to recover its input tax. The appeal is therefore allowed.

We registered for gift aid last year and this is applied to donations but not homing 'donations' which we have always set at a minimum (currently £75 per cat). I assume this means that we can register for VAT and also claim back VAT on our expenditure?

Are there any downsides to registering for VAT?

We have no accountant or tax advisors as we are such a small outfit - its just me, a free software package and co-ercing someone to audit out accounts!

Thanks

Saw this case, although have not read it thoroughly yet - more interested in the what was looked at re the definition of 'donation' versus 'consideration' than the particular circumstances of the appealant;

In any case; if you register for VAT you have to keep certain records, a bit of reading on HMRCs public notices will give you a good overview of this;

On the plus side, if you are making zero-rated supplies; then you can recover all VAT incurred on expenses which relate to those supplies. On the downside, where you are not currently VAT registered and may make sales of e.g. dog collars, and don't currently have to charge VAT, after VAT registration you would have to charge VAT, which may eat slightly into any margins (note that you can recover VAT on the purchase of the collar). Also you would need to consider any exempt supplies you make - which results in some input VAT being irrecoverable.

Never dealt with an animal charity - so sorry for the vague advice, but I don't know what types of supplies you might make.

[King_Maker]

Yes, if it's mandatory payment for the "sale" of a cat.

No, if it's a purely voluntary donation - so there could be no payment for re-homing a cat, in theory.

[section 44]

Can you expand on this (hence, is there a donation):

homing 'donations' which we have always set at a minimum (currently £75 per cat).

[covcats]

Can you expand on this (hence, is there a donation):

homing 'donations' which we have always set at a minimum (currently £75 per cat).

there is always a fee. I have homing forms from 2005 that quote "a minimum donation of £20 (those were the days!)".

Sometimes , we will waver a fee if the cat is old or ill or hard to home (feral) but thats all (as I think Three Counties admitted to doing in their document).

[JLF1234]

If you call a mars bar a packet of crisps, what is it? It’s still a mars bar no matter what you try to call it.

In the same way, you can call something a donation, but it doesn’t mean it is a donation. A donation has to be freely given and in the case of the dogs home, it wasn’t. The person wanting the dog could only obtain it my making a minimum £150 payment, a consideration for a supply, which brought it into the remit of VAT. The sale of a dog could be zero rated under Item 1, Group 15 Schedule 8 of the VAT Act 1994 – allowing for the zero rating of a sale by a charity of any goods donated to it. This meant that they could register for VAT and recover their input tax.

[section 44]

The person wanting the dog could only obtain it my making a minimum £150 payment

but yet:

Sometimes , we will waver a fee

?

[Generix]

The person wanting the dog could only obtain it my making a minimum £150 payment

but yet:

Sometimes , we will waver a fee

?

so using the analogy above, sometimes you will go into a shop, ask for a mars bar, and most of the time you'll get a packet of crisps, but on occassion if the actual mars bars are close to their sell-by date then you will receive a mars bar....

[section 44]

… but sometimes you'll already have a snickers at home and may find that the mars bar is scared of the snickers, particularly if the mars bar was free. But to make matters worse, if your neighbour has a king size snickers then even you snickers may be running scared and if it does in fact run away then the snickers may return and a few months later you'll find yourself looking for homes for a bag full of fun size snickers …

[JLF1234]

The person wanting the dog could only obtain it my making a minimum £150 payment

but yet:

Sometimes , we will waver a fee

?

The Tribunal held that the payments made by owners were not freely given , with only one exception for old or ill dogs.