VAT and other taxes

Value-added tax (VAT)

If you are supplying goods or services in return for payment and your annual earned income is likely to be over the VAT threshold (£82,000 in March 2016) you must register for VAT and charge VAT on goods and services unless they are exempt or zero-rated.

VAT at the standard rate applies to sales of food and drink to be consumed on the premises (e.g. in a café). Food and drink which isn’t consumed on the premises are mostly zero-rated but many are not (e.g. savoury snacks, hot takeaway food) so it’s important to take advice and be sure.

Charities are also exempt from paying tax on certain goods and services including building hire and some types of membership fees.

The rules are quite complex and the cost of getting it wrong can be steep. So, get to know the rules that are relevant to your activities and, if you are in any way unsure, take advice and/or get a ruling in writing from HM Revenue and Customs (HMRC).

National insurance

If your project has an employee, employer’s national insurance contributions (NICs) must be paid for them at the same time as you deduct tax and their own NICs using the PAYE (Pay As You Earn) system.

Corporation tax

If you are a limited company you must pay tax on your profits, however charities are exempt in many circumstances, e.g. so long as the profits are used for charitable purposes. Again take advice.

Where to go for information