Collaborative Working - Goldblatt McGuigan

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  • 1.
    • GOLDBLATT McGUIGAN 30 MARCH 2011
    Alfred House, 19 Alfred Street, Belfast BT2 8EQ www.goldblattmcguigan.com COLLABORATIVE WORKING
  • 2. COLLABORATIVE WORKING
    • JACKIE SMITH
    • Partner, Audit and Business Services
      • Email: [email_address]
      • Telephone: 028 9031 1113
  • 3.
    • COLLABORATIVE WORKING
    • Collaboration = The act of working with another or others on a joint project
    • Collaborative working is people working together towards common goals
    COLLABORATIVE WORKING
  • 4.
    • SHARED USE OF SKILLS AND RESOURCES:
    • Administration services
      • Book-keeper or accountant
      • IT support services
      • Business development manager
      • HR Manager
    • Premises and related overhead costs
      • Rent and rates
      • Cleaning
      • Light and heat
      • Repairs and maintenance
    COLLABORATIVE WORKING
  • 5.
    • SHARED USE OF SKILLS AND RESOURCES:
    • Purchases
      • Bulk buying arrangements
      • Reduced wastage
    • Capital Equipment
      • It may not be financially viable for an organisation to purchase certain equipment on its own
    • Informal sharing of information and resources
      • Expertise
      • Experience
      • Reduced printing costs
    COLLABORATIVE WORKING
  • 6.
    • FUNDING:
    • Provides access to funding that smaller organisations could not obtain on their own
    • Can jointly tender for commissioned service delivery that each organisation could not deliver independently
    • Funders often see collaboration as a means to get better value for their money
    COLLABORATIVE WORKING
  • 7.
    • BENEFITS TO YOUR BENEFICIARIES:
    • Enables an organisation to provide new or improved services
    • May provide a wider geographical reach, or access to new beneficiary groups
    • More co-ordinated approach to meeting the needs of beneficiaries
    COLLABORATIVE WORKING
  • 8.
    • OTHER BENEFITS:
    • New ideas
    • Each organisation can focus on what they do best
    • Increased profile
    • Strength in numbers
    • Stronger voice
    • Shared knowledge, shared experience and shared risk when undertaking new projects
    COLLABORATIVE WORKING
  • 9.
    • OBSTACLES:
    • Resistance to change
    • Competition between organisations
    • Lack of information
    • Cultural differences
    • Personalities
    • Lack of clarity over respective roles and responsibilities
    • Lack of trust
    COLLABORATIVE WORKING
  • 10.
    • RISKS:
    • Loss of autonomy and flexibility
    • Do the benefits justify the time and resources invested?
    • Mission drift – resources may be diverted away from the organisation’s core aims
    • Potential damage of reputation
    • Wasted resources if collaboration is unsuccessful
    • Legal obligations
    COLLABORATIVE WORKING
  • 11.
    • OTHER OPTIONS:
    • Creation of a new separate organisation
    • Merger
    COLLABORATIVE WORKING
  • 12. COLLABORATIVE WORKING
      • GETTING COLLABORATION RIGHT – TAX AND
      • VAT ISSUES
  • 13. COLLABORATIVE WORKING
    • LYN HAGAN
    • Tax Partner
      • Email: [email_address]
      • Telephone: 028 9031 1113
  • 14. COLLABORATIVE WORKING
    • MAINTAINING CHARITABLE TAX STATUS
    • Charities may claim exemption from taxation on income applied to charitable purposes
    • Risk to exemption where the charity undertakes another activity
    • Hive-down activity to a subsidiary vehicle, where required – mitigating tax using gift aid
  • 15. COLLABORATIVE WORKING
    • VAT
    • Review of funding agreements/contracts required
    Non-Business Activities Business Supplies Taxable Exempt Standard-rated Reduced-rated Zero-rated
  • 16. COLLABORATIVE WORKING
    • NON-BUSINESS INCOME INCLUDING GRANTS
    • Income outside the scope of VAT
    • No input VAT recovery
    • Can irrecoverable input VAT be funded by grant?
    • David Cameron has previously commented that it “should…look at funding them [charities] on the same basis the government funds itself” i.e. where VAT is refunded in relation to non-business activities
  • 17. COLLABORATIVE WORKING
    • BUSINESS INCOME
    • VAT liability of supply to be determined – taxable or exempt
    • VAT registration where taxable supplies exceed VAT registration threshold of £70,000 (£73,000 from 1 April 2011)
    • If already VAT registered – impact of business supply on input VAT recovery
      • Taxable supplies – fully recoverable
      • Exempt supplies – irrecoverable unless de minimis
      • General overheads – apportioned based on method in use or agree a special method with HMRC
  • 18. COLLABORATIVE WORKING
    • WORKING IN ‘PARTNERSHIP’
    • Who is the contracting lead ‘partner’?
    • Is the lead ‘partner’ administering a grant to its ‘partner’ or purchasing services from its ‘partner’?
    • Is irrecoverable input VAT created on the purchase of ‘partner’ services and how is this funded?
  • 19. COLLABORATIVE WORKING
    • CONSIDERING A MERGER
    • Consider all merging organisations’ sources of income and VAT impact of merger
    • VAT registration threshold breached following merger?
    • Impact on input VAT recovery – agree a special method to recover input VAT for newly merged organisation?
    • Transfer of a going concern (TOGC) VAT rules
    • Transfer of premises – tax and VAT considerations
    • Other taxes
  • 20. COLLABORATIVE WORKING
    • SHARING/LEASING PREMISES – ZERO-RATING
    • VAT impact of sharing/leasing your premises
    • Was zero-rating obtained within last 10 years on the charity’s premises?
    • Prior to 1 March 2011 no VAT charge where original intention was to use premises for 95% or more charitable purposes
    • New rules from 1 March 2011 with potential VAT charge
  • 21. COLLABORATIVE WORKING
    • SHARING/LEASING PREMISES – OPTION TO TAX
    • Has an ‘option to tax’ been exercised on the property?
    • Disapplication of option to tax to be considered including where property leased to a connected party or a charity in certain circumstances
    • Potential clawback by HMRC of input VAT recovered by charity on property acquisition
  • 22. COLLABORATIVE WORKING
    • SHARING OVERHEADS – EU COST SHARING EXEMPTION
    • Currently the recharge of back-office expenses between charities is generally standard-rated for VAT purposes
    • Additional VAT cost for recipient charities
    • Under EU VAT law such recharge of back-office expenses is exempt
    • Awaiting implementation in the UK
    • 2011 Budget announced continued UK consultation
  • 23. COLLABORATIVE WORKING
    • SHARING STAFF
    • Supply of staff normally standard-rated for VAT purposes
    • VAT staff hire concession – value of supply can be reduced
    • Joint employment contracts – no supply for VAT purposes between joint employers
    • Paymaster services – recovery of monies can be treated as a disbursement
  • 24. COLLABORATIVE WORKING
    • CONCLUSION – TAX AND VAT
    • Maintenance of charitable status
    • Sources of income and VAT status
    • Impact of ‘partnering’/other arrangements and merging – VAT registration, TOGC and input VAT recovery etc
    • Sharing premises – impact on zero-rating and option to tax
    • Sharing overheads – potential future VAT exemption
    • Sharing staff – options to ensure no supply
  • 25. COLLABORATIVE WORKING
    • DISCLAIMER
    • The views expressed in this presentation represent an outline of the relevant provisions and are not intended to be exhaustive. No action should be taken on the basis of information contained herein in respect of any specific case without obtaining the necessary professional advice. No responsibility for loss occasioned to any person acting or refraining from action as a result of the material in this presentation can be accepted by Goldblatt McGuigan.