£300m charity VAT relief under threat

300m charity VAT relief under threatThe battle over VAT relief for companies running direct mail campaigns refuses to die down after a leading accountancy expert claimed that the £300m a year in relief that charities have been managing to claw back is still under threat.
Just two weeks ago, the DMA warned that under certain circumstances a supplier providing direct marketing services such as list buying or targeting together with zero rated print could be assessed as providing a “single supply” of a direct marketing service. This would mean that the whole supply – including the zero rated print – would become subject to VAT at the standard rate of 20%.
And according to John Voyez, VAT partner at accountancy and investment management group Smith & Williamson, many charities will still be unaware of the implications of the changes to so-called single-sourcing and the additional VAT cost they face.
He added: “From August 1 changes will be implemented to restrict the extent of zero rating for VAT purposes, and HMRC has taken the view that the VAT liability of most of the component parts of the direct mailing supply should be treated as standard rated.
With only a few weeks to go, before a single contract for direct marketing and mailing supplies is treated as a standard tax rated supply, many charities and direct mail providers are having to consider the consequences of this VAT change, Voyez reckons.
“Despite discussions with HMRC having been ongoing for over a year, many charities are unlikely to have considered the potential financial impact this change may have. The costs could run into millions. Charities need to be talking with their direct mailing providers to analyse their position and ascertain what steps can be taken to ensure a successful conclusion.”

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