The latest Budget includes VAT developments that charities should have on their radar, particularly those managing VAT recovery or planning building improvements.
Here’s what you need to know.
1. VAT126 claims
The Budget includes provisions relating to VAT126 claims, including enabling powers and safeguards. Charities that use the VAT126 scheme should keep an eye on the implementation details and consider whether any changes could affect their processes for recovering VAT.
2. VAT relief on energy-saving materials
VAT relief for qualifying energy-saving materials can be relevant to charities investing in their buildings.
With the current zero-rate relief scheduled to end on 31 March 2027, charities considering projects such as solar panel installations should factor the VAT treatment into their plans and budgets.
What should your charity do next?
- Review your current VAT recovery processes.
- Keep up to date with further guidance on VAT126 claims.
- Consider the timing and VAT implications of planned building improvements.
3. Overseas services: Changes to the VAT reverse charge
From April 2027, the government will reform the VAT reverse charge for business-to-business services purchased from overseas suppliers.
Under the new rules, the reverse charge will apply only where the UK recipient is VAT-registered. Overseas suppliers will instead need to charge UK VAT on relevant services supplied to UK organisations that aren’t VAT-registered.
What could this mean for your charity?
- Increased costs: If your charity isn’t VAT-registered, you could face additional VAT costs on overseas services, such as cloud software, digital subscriptions and consultancy.
- VAT registration requirement: Consider if this impacts any VAT registration requirements that may have arisen due to the previous reverse charge rules.
- Review your suppliers: Identify the overseas services your charity uses and consider how the changes could affect your costs.
- Plan ahead: Factor any potential additional VAT costs into your budgets ahead of April 2027.
What’s next?
Our tax experts have taken a closer look at the announcements and their implications in our full Autumn Budget summary. Read the full version here.
