CHARITIES AND VAT

It is wrong to assume that Charities get special VAT treatment, however, they do benefit from VAT relief on the purchase of some goods and services.

They can also get a VAT exemption on income from fundraising events as long as certain conditions are met (VATA1994, Sch 9, Group 12).

Purchases that can qualify for VAT exemption:

• Rental charges – If a landlord has Opted to Tax (OTT) a commercial building he should charge VAT on the rentals. However, if a charity uses the building for a “relevant charitable purpose”, the charity can certify its use of the building to the landlord, which has the effect of overriding the OTT
• Advertising charges – HMRC, in its public notice 701/58, states that a supply of advertising to a charity registered with The Charity Commission is zero-rated
• Fuel charges – Supplies to a charity of gas and electricity are subject to the VAT lower rate of 5% as long as the fuel is used on non-business use (i.e. on its charitable purposes)

Fundraising income exemption

VAT is exempt when money is raised by a charity for a fundraising purpose.  This exemption also applies to trading subsidiaries that are owned by the charity.

PLEASE NOTE that the above reliefs/exemptions come with specific conditions so please contact Hawsons before application of these rules, as Charities should be wary of HMRC penalties.

We may also be able to claim VAT going back four years if you have inadvertently paid VAT on eligible purchases or exempt fundraising events.

More from our charity experts

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