VATCharities

VAT is a complicated tax and can be particularly complex for charities There is a generally held misconception that charities do not have to charge or pay VAT. This is not the case although there are reliefs that charities can take advantage of.

Do charities pay VAT?

A body is considered a charity if it has charitable status. A non-profit making body does not necessarily have charitable status. To qualify for VAT reliefs, a charity must be:

  • based in the UK, Isle of Man, EU, Iceland, Liechtenstein, or Norway
  • established for charitable purposes only
  • registered with the Charity Commission or corresponding regulator, where required
  • be run by ‘fit and proper persons’
  • recognised by HMRC

 

Charity Income

Charities receive income from a variety of sources, which may be liable to VAT. Charity income can be split into non-business income and business income.

  • Non-business income: This includes grants and voluntary donations and is outside the scope of VAT.
  • Business income: The definition of “business” for VAT purposes is governed by specific rules and regulations. An activity performed for the benefit of the community, or in the furtherance of charitable aims and objectives, may still be a business activity for the purposes of VAT. Depending upon its nature, business income can be taxable at the standard-rate, reduced-rate or zero rate. In some cases, business income may be exempt from VAT.

Examples of business income generated by charities include:

  • admission to premises
  • admission to events
  • advertising services
  • sales of goods (new and/or donated)
  • catering services
  • hiring out rooms and/or buildings.

Charities must register for VAT if it exceeds the VAT registration threshold. This is currently £90,000 in a rolling 12-month period.

 

Charity Purchases

Many of the goods and services that charities buy will be subject to VAT. A VAT-registered charity may be able to reclaim some, or all, of this VAT, but should not assume that it is entitled to do so. There is relief from VAT on some purchases.

VAT relief on the following is available for charities:

  • Advertising and goods connected with collecting donations
  • Aids for the disabled
  • Construction
  • Drugs and chemicals
  • Equipment for producing ‘talking’ books and newspapers
  • Lifeboats, slipways and launching and recovery equipment
  • Medical and scientific equipment
  • Medicinal products
  • Resuscitation training models

Charities claiming relief must usually make some form of eligibility declaration. A supplier cannot zero-rate the supply unless they have verified the purchaser is a charity. They must also meet the requirements for the applicable relief.

 

Fuel and Power for Charities

There is no general relief from VAT on supplies of fuel and power to charities. Charities can pay the reduced rate (currently 5%) where fuel and power is supplied for non-business use, or is below a monthly de minimis threshold.

 

Additional VAT Resources

We want to ensure charities understand the VAT reliefs available to them. These rules are complex and we welcome you to browse of our supporting articles below. Alternatively, give us a call if you have a specific query.

 

How the Shorts team can help

If you run a charity and have questions about VAT, including how much is payable and what reliefs are available to your charity, Shorts has a specialist VAT department to help guide charities through all of the complexities of VAT.

Whatever your VAT query involves, get in touch with our team of specialists today

IF YOU HAVE A QUERY RELATING TO VAT FOR CHARITIES THAT IS NOT ANSWERED HERE - PLEASE CONTACT US USING THE FORM BELOW.

VAT for Charities - FAQs

  • Do charities pay VAT?

    It is often assumed that charities are exempt from VAT; however, this is a misconception. Charities aren’t entirely exempt from VAT. They do, however, receive certain reliefs and exemptions on goods and services that are related to their charitable causes.

    Charities must register for VAT like other organisations if their taxable turnover exceeds the £90,000 VAT threshold in a rolling 12-month period.

  • Are charities exempt from VAT?

    Charities are not exempt from UK VAT; however, they benefit from various reliefs and exemptions on specific charitable supplies. They will still need to register for VAT if they cross the taxable turnover threshold (£90,000 in a 12-month period). Once VAT registered, they must  apply VAT to their standard rated sales.

  • Can charities claim back VAT?

    Charities will have to pay VAT on certain goods and services they purchase. If a charity is registered for VAT, it might be able to reclaim some or all of the VAT paid, but this isn’t guaranteed. However, there are some purchases for which charities will not have to pay VAT on, and this relief is available even if the charity is not VAT registered.

  • Can a charity be VAT-registered?

    Yes, charities, like other organisations, must register for VAT if their taxable turnover exceeds £90,000 in a 12-month rolling period.

  • Do charities have VAT registration numbers?

    Yes, once VAT registered, charities will be issued a VAT registration number.  However, a charity does not have to register for VAT if their taxable supplies do not exceed the VAT registration threshold set by the government.

  • Are charitable donations exempt from VAT?

    Donations and grant income are not considered as payment for a service. They are regarded as a non-commercial activity and are therefore outside the scope of VAT. Such income is given voluntarily without any obligations attached, and is viewed as a gift.

  • Are there VAT relief schemes available for charities?

    There are a number of VAT reliefs available for charities in the UK. Each has its own set of requirements that must be fulfilled, and charities aiming to benefit from these reliefs typically need to provide eligibility declarations confirming that the necessary conditions have been satisfied for that particular relief. Available VAT reliefs include advertising, goods connected with the collection of donations, collection boxes and receptacles, and aids for the disabled.

    For a full list of available Vat reliefs for charities, we recommend reading our VAT Reliefs for Charities – Comprehensive Guide.

  • Where can charities find guidance on VAT?

    Guidance on VAT for charities can be found on the HMRC website; however, for specific queries related to more complex issues, it is strongly recommended that you speak to a qualified VAT specialist. The Shorts VAT team has a wealth of experience working with charities, and are happy to offer assistance.

Shorts has more expert tax advisers than any independent firm in our region. Whatever your VAT query, our team is here to help.

The Shorts VAT Team

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