A large animal welfare and conservational wildlife charity had recently been told by its auditors that it had got the VAT treatment of its membership packages wrong, resulting in a six-figure liability due to HMRC. We were approached by the charity to provide a second opinion as well as helping identify any ways the liability (both historic and future could be mitigated) and helping with the approach to HMRC.
We conducted a full VAT review of the organisation, as well as providing support for the possible approach by HMRC.
Result
Having reviewed the position, we were able to identify that the VAT treatment of memberships was not incorrect, but there was an issue of the valuation of the constituent parts of the membership. There was also justification for the current VAT treatment, albeit it also carried a level of risk which we helped the charity mitigate with appropriate correspondence and disclosure to HMRC
We were also able, based on HMRC guidance and settled case law, to suggest amendments to the membership structure going forward to further improve the VAT profile.
As a result of our support, the potential VAT exposure was reduced by 60% and a strong argument could be put to HMRC supporting the previous VAT treatment, thereby mitigating the impact of penalties.
Outside the scope of the original inquiry we have proposed recommendations, with outlines of the level of risk involved, for solutions going forward to enhance and protect the VAT profile of the charity. We now have a working relationship and provide ongoing support.
