CIC Association

Serving Community Enterprise

A question from STAMFORD TOWN PARTNERSHIP CIC

As a registered CIC do we have to pay VAT on marketing. More specifically the following:

1. Advertising our community event in a local newspaper
2. Advertising on radio with a schedule of promotions
Is this VAT exempt or 0% rated or charged to us a standard rate?

I have asked so many people this question but no seems to have a clear answer. I have also tried getting through to HM Customs but they are continually engaged. I need to book the above marketing as a matter of urgency but am reluctant to do so until I have clear confirmation on this issue. Funding for this event is tight therefore it is vitally important that we explore this further – can you help?

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Hi Stamford Town
I had an interesting and informative meeting with the VAT man yesterday and i reckon you will have to pay VAT on this . Have a look at the Notices on Partial Exemption No 706 - and the VAT handbook - both downloadable from HMRC website at
http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebAp...

They are not too bad to skim read - honest!
Kind regards

Pam - pam.bennett@goingforindependence.org
I'm sure Pam's right on this. There are a number of specific VAT reliefs enjoyed by charities, including advertising (zero rating), but none of these, as far as I know, are available to CICs.
Do bear in mind though that if you are trading in VATable products or services to any extent you may be able to register for VAT - and that the effect of registration for organisations not selling direct to the public or to the voluntary sector is generally positive - it increases profitability (because you claim back VAT on all your expenditue) and cashflow (because you don't pass on the VAT you charge customers until after - maybe even long after - you have received it). You have to do a little more accounting of course but it's usually dead easy.
The only big negative about being registered for VAT is that it puts up your prices if your customers are not themselves VAT registered (ie. the general public, very small businesses or non-trading voluntary sector bodies).
A CIC cannot be a charity and so you will have to pay VAT on such advertising.
Geoff is correct - becoming VAT registered is generally desirable as long as you sell to other registered entities.

That said, VAT is a wierd world and all sorts can be agreed with HMRC VAT-men & -women. Ask for dispensation to have the charitable exemptions extended to you and see how you go. You won't do it in tme for this expense, but maybe others.

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