Is there VAT on website design services for charity?
One of my clients provides information technology and website services and has just designed a digital platform for a charity – referred to as a ‘sales deck’ – and charged a time-based fee for their work. My client charged VAT because the charity is based in the UK, but the charity’s chief executive officer has challenged it on the basis that the work qualifies for zero rating as a supply connected to advertising for a charity. Her argument is that the platform will lead to extra revenue for the charity funds, so qualifies as an advertising mechanism. Is this correct? She has referred my client to HMRC Notice 701/58.
As a separate question, my client has a contract in the pipeline to do the same work for a charity based in the Netherlands. This charity is a church and does not have a Dutch VAT number. Should my client charge UK VAT on this fee or, alternatively, register for VAT in the Netherlands?
Query 20,663 – Webb.
Own goal?
I act for a successful local building company. It has traditionally sponsored a number of local amateur sports clubs in its immediate area. This is partly out of a sense of community but also because it considers that the display of its name at these grounds is useful advertising. The amounts involved are small – perhaps two or three sponsorships a year at £3,000 to £5,000 each. I have always treated these as tax deductible in the company’s accounts and have never had a challenge from HMRC.
The company is expanding and has taken on a new marketing director. He thinks that these small donations are a waste of money and wants the company to make a single large annual sponsorship payment (approximately £50,000) to the local football club instead. It turns out that his daughter is the star player at the club, and it seems he is hoping that the money put into the club will help to pivot her towards a professional contract. I have said that in my view the sponsorship would be dual-purpose expenditure, which is disallowable. He says that I am being unreasonable and that this is a tax deductible expense.
Am I being over cautious? Any thoughts readers might have will be much appreciated.
Query 20,664 Defender.
Is silence golden?
My client has been subject to an HMRC investigation. Agreement has been reached on the additional tax due (largely because of disallowance of dual-purpose expenditure) and the HMRC officer is now considering penalties. The client has been asked a number of questions about whether he took advice, whether he checked the competence of the adviser etc.
What obligation does he have to answer any of those questions? The burden of proof for penalties falls on HMRC, so if he remains silent then how can HMRC prove that a penalty is due?
This seems a high-risk strategy, but I would be interested to know whether other readers have tried it, and with what success.
Query 20,665 – Sceptical.
Happy ever after ...
My client John, a successful businessman, died suddenly a few months ago. In his will he left everything to his wife, Jane.
Jane came to see me last week in a state of real distress. She had always known that John was briefly married 20 years ago to Susan, but she has just discovered that there was a technical problem with the divorce from Susan and the decree was never properly finalised. So it seems that John was still legally married to Susan when he died.
Susan is aware of the situation and is making no claim on John’s estate but it now appears that John’s estate will not qualify for the spousal exemption and will be charged to inheritance tax in full.
Has anybody ever come across this situation before: is there any possibility that somehow the spousal exemption can be preserved?
Query 20,666 – Bemused.
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