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VAT News - July 2009

Charities constructing new buildings

HMRC recently announced that it is withdrawing an important concession for Charities that construct or purchase new buildings. To view as a pdf click here

At present, the construction of a building that will be used solely for relevant charitable purposes (nonbusiness use) is zero rated. Given that most charities are unable to recover all of the VAT they incur, this provides a welcome benefit.

At present, as long as the 90% of the new building is used for non-business purposes the entire building can be zero-rated. Furthermore, there is no clawback or adjustment where the use of the building changes in the first 10 year period.

The recent announcement brings these rules to an end with effect of 30 June 2010. Until then, the existing rules apply.

From this date, the term solely will change to 95% or more non business use. This change obviously reduces the element of business activity; however the sting in the tail is the introduction of a requirement to make an output tax charge where the use of the building changes in the first 10 years of the use of the building.

Charities that have already obtained zero-rating or those that intend to construct or purchase a qualifying building before 30 June 2010 should still use the current “90%” concession and will not be required to make any adjustment in future if the use of the building changes.

Charities that are considering purchasing or constructing a new building during the next 18 months should consider doing this before 30 June 2010. This could avoid a future clawback should the use of the building change in the first 10 years following purchase or construction.

HMRC Update their bank details

The bank account information for making VAT related payments to HMRC changed on 8 July 2009.

The new details are as follows:

Sort Code – 08 32 00

Account Number – 11963155

Account Name – HMRC VAT

The change will affect those who pay VAT returns electronically via BACS, CHAPS, Telephone/ Internet banking.

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