A TOP animal charity faces a massive tax bill after getting its books wrong, it has emerged.
The Manx Society for the Prevention of Cruelty to Animals has been over-claiming VAT for several years.
Steve Burrows, one of the directors of the ManxSPCA said it would be inappropriate to reveal the scale of the discrepancy until after charity’s AGM.
He insisted that animal welfare services would not be impacted even if the final bill turns out to be significant, but it is a major embarrassment for the welfare group.
Mr Burrows said: “I don’t know how significant it will prove to be in terms of our overall finances.
“I’m confident it will not be sufficiently significant to disrupt the operations and viability of the ManxSPCA.
“If there turns out to be a substantial bill, the order of magnitude which is not for me to disclose, this will in no way threaten our ongoing viability and ability to deliver services.”
The error, described as an “unintended accident” came to light after a report to a board meeting in late April after the VAT position was reviewed.
Accountants have been going through financial records going back several years to establish the scale of the overpayment.
An exact figure won’t be established until it has been agreed with Customs and Excise.
Mr Burrows said it had been a “nightmare” for all involved and it had been “extremely distressing” for those who had mistakenly applied the wrong rules on VAT liability.
VAT returns had been prepared and filed in good faith by members of staff who were not tax specialists, he said.
He stressed: “There has been no intentional wrong-doing by anybody. This was a genuine honest mistake with no mal-intent of any sort.
“Our current board recently came to the realisation that historically the MSPCA has been taking the wrong approach to calculating its VAT liability and filling in its VAT returns.”
In general, a charity must comply with the same rules as other businesses regarding VAT.
Until recently, the MSPCA had been filing returns in which all vatable supplies were charged with VAT and all VAT on goods and services received were reclaimed.
But this was not correct as some of its services are not vatable and so any VAT incurred should not have been recovered.
The board has recently taken on several new members who are qualified in tax, finance and corporate and charity governance.