If you hire venues for your church, you could be paying VAT that you don’t need to pay. We saved £500 a month when we found out!

We recently discovered that the venues we hire for weekend and midweek events and services can actually ‘disapply’ the option to charge us VAT on those hires. Up until that point we had been paying over £100 a week in VAT. I’ve asked our Executive Pastor, Owen Morgan to explain the details.

A Landlord/Property Owner has the option to tax the facilities they let out. Most Landlords/Property Owners choose to apply tax because it means that they can reclaim the VAT they pay up to the amount they charge. However there is an option in the VAT on Property law that says if a room or building is being hired for charitable purposes the option to tax can be ‘disapplied’.

It is at the discretion of the owner as obviously the less tax they pay, the less they can claim back. We asked the hotel where we regularly meet if they would ‘disapply’ the option and provided them with the relevant paragraphs from the HMRC Guidelines (see below). They agreed to ‘disapply’ the tax when letting the facilities to us. They are able to do this as the amount of tax they usually charge is greater than the amount the claim back.

We hire the hotel for one day every week but it is also possible to disapply the option to tax on a whole building for example our administrative offices. However it is not as easy to convince the Landlord/Property Owner to do this they are not able to offset any VAT paid out on repairs and maintenance.

All that is required is for you to inform the company which you are hiring from and provide them with the relevant HMRC information and they can ‘disapply’ the tax. We saved nearly £500 per month – that’s £6000 per year!

Unfortunately, the law can only be applied from the present time forward. That means that we were unable to claim back VAT retrospectively. We looked into pursuing this but found that there was case law from where someone had tried to claim it back. Our friends in Newcastle our still looking into it and we’ll keep you posted if we hear of any success stories.

Click here to go to the HMRC website for Notice 742A: Section 3.5 is the relevant bit.

For further queries contact the HMRC Charities Helpline on 08453 020203.