Charities warned on VAT overpayments

Charities accounting for VAT under the reserve-charge provision need to consider whether they could be overpaying RSM has warned.

It follows a First-tier Tribunal decision concerning the application of the reverse charge when in the case of Wellcome Trust Ltd payments were made to non-EU overseas investment managers relating to the company’s non-business activities (in this case the buying and selling of shares). The total VAT payable on the reverse charge was £13m. The courts had previously prevented Wellcome Trust from recovering VAT on these non-business activities.

HMRC considered the place of supply to be the UK so that Wellcome Trust was right to account for VAT under the reverse-charge provisions whilst the charity asserted the place of supply to be outside the UK so UK VAT was not due. The tribunal considered that the case turned entirely on the meaning of the words...