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A construction company is carrying out work for a main contractor on a university building. The contractor has asked the company to charge VAT at only 4% to reflect the level of input tax recovery
My client is carrying out some building work on a new university building. The building will apparently be partly used for a “relevant charitable purpose” by the university this purpose being linked to research activities.
This is where things become a little more complex.
My client has received a copy of some very detailed and confusing correspondence between HMRC and the university’s accountants. The letters talk about a 4% input tax recovery on the project costs by the university linked to the fact that there is 96% non-business use.
The contractor for whom my client is working has therefore asked my client to charge VAT on only 4% of the total invoice value because the other 96% of the work is linked to a charitable use.
To illustrate this would mean that on a supply of labour and materials with a value of £1 000...
