14 December 2018
The Wellcome Trust is a leading funder of research intended to improve human and animal health. It has recently won a case against HMRC that will result in £13m of retrospective savings for the charity. HMRC are seeking to appeal the decision.
What did the £13m relate to?
There is a legal requirement to account for VAT on services received from outside the UK under a procedure called the reverse charge. This results in a VAT registered entity charging itself VAT and recovering it if it is allowed to do so. This is intended to remove any distortion of competition arising from the procurement of services from overseas that might otherwise be free of VAT when compared to a UK supplier.
How did this apply to the Wellcome Trust?
The ECJ has already ruled that the investment activities of the Wellcome Trust are not economic activities for VAT purposes. This means they fall outside the VAT net. There are complex VAT principles at play here, but in effect this means the Trust are not acting in an “economic” (or “business”) capacity in respect of these activities.
The VAT tribunal has now ruled that the reverse charge does not apply to overseas investment services received by the Wellcome Trust that relate to its non-economic activities. This is because the Trust is not acting as a taxable person when receiving these services and as such the reverse charge does not have to be applied to these overseas services.
Is there a benefit for us?
If the reverse charge on services received from overseas suppliers forms part of your charity’s VAT return then you should consider if the ruling can apply to your organisation. It would be prudent to make a protective claim subject to the matter being considered by superior courts.
Further information
If you would like to discuss any aspect of this decision please do not hesitate to contact Sean Glancy, David Rawcliffe or your usual UHY contact. Alternatively, you can read more about the services we provide to charities here.
