A leading VAT adviser is warning charities in Wales to be vigilant when it comes to registering their charity with the Charity Commission in order to avoid a run in with HM Revenue & Customs.

Newport-based Centurion VAT Specialists has noticed an increasing trend for HMRC to contact non-VAT registered charities in order to establish whether they generate sufficient income to be VAT registered, potentially leading to costly VAT bills for charities.

VAT registration is triggered when an organisation generates an amount which exceeds the VAT threshold of taxable business income. The threshold is currently set at £81,000, although this figure is likely to change in the 2015 budget in March.

Liz Maher, director at Centurion VAT Specialists, said: “It is vital that charities recognise that their primary purpose trading activities could still be regarded as business activities from a VAT perspective and that if the amount of taxable income generated reaches the registration threshold, even if it is zero-rated income from the sale of donated goods, then a charity must notify HMRC.

“Charities, possibly even more so than other organisations, need to be careful with their accounting practises and need to ensure that they are checking the VAT liabilities of their income stream and the values generated at regular intervals. This is a simple but crucial audit which could cut additional costs for organisations which are keen to avoid them.”