In this section:
This Help Sheet is aimed at charities and qualifying bodies that raise money through fund-raising events. It sets out the conditions for direct tax and the VAT exemption that apply to fund-raising events held on or after 1 April 2000. Customs VAT Notice 701/1 'Charities' (including Update 1 dated February 1997) sets out the law and guidance on the VAT exemption for fund-raising events held before 1 April 2000.
This helpsheet replaces VAT Notice CWL4 ‘Fund raising events: Exemption for charities and other qualifying bodies’ (April 2000). The VAT Notice has now been withdrawn.
This Help Sheet applies to all fund-raising events including small scale events directly conducted by charities, and other qualifying bodies, and larger fund-raising events conducted by the trading subsidiaries of charities.
If the event held by a charity meets the criteria for VAT exemption then it will automatically qualify for the purposes of the HMRC Extra-Statutory Concession ESC C4 for exemption from income tax and corporation tax as long as the profits are applied charitably. This concession only applies to events organised by charities and voluntary organisations.
"Certain events arranged by voluntary organisations or charities for the purpose of raising funds for charity may fall within the definition of "trade" in Section 832 ICTA 1988, with the result that any profits will be liable to income tax or corporation tax. Tax will not be charged on such profits provided.
a) the event is of a kind which falls within the exemption from VAT under Group 12 of Schedule 9 to the VAT Act 1994 and
b) the profits are transferred to charities or otherwise applied for charitable purposes."
The fact that an activity is exempt from VAT, and that any profit will not be taxed, does not necessarily mean that charities can undertake the activity directly rather than through a trading company.
Further information about the direct tax treatment of trades carried on by charities can be found here Trading by Charities.
For VAT purposes, a charity's activities could be entirely non-business, exempt business or taxable business (standard rate, reduced rate and zero rate), or any combination of these.
However, for VAT registration purposes charities only need to take account of the income from their taxable business activities. When that exceeds certain limits charities must notify their local VAT Business Advice Centre. These limits and the procedure for registering for VAT can be found in VAT Notice 700/1 'Should I be registered for VAT?'. The registration limit is reviewed annually.
Charities can also apply to register voluntarily if they make taxable supplies below those limits.
Exempt supplies (business supplies which have no VAT charged on them at either the standard or zero rate, such as qualifying fund-raising events) do not form part of your taxable turnover. If you are registered for VAT and make some exempt supplies, it may restrict the amount of VAT recoverable on overhead expenses. You can find further information in VAT Notice 706 'Partial exemption'.
The exemption for charitable fund-raising is based upon Article 13A(1)(o) of the EC Sixth Directive on VAT which was first adopted by the UK in 1989. It is designed to allow charities, and other qualifying bodies, to exempt supplies of goods and services which they make as part of an event held to raise funds for their activities.
Not all fund-raising events will qualify for exemption as this could give charities and other qualifying bodies an unfair advantage over commercial providers. European Community member states may introduce any necessary restrictions they consider necessary in order to prevent distortion of competition.
Charities also need to take account of charity law which limits the fund-raising events they can hold. For more information about this you should read the Charity Commission's publication CC20 'Charities and Fund-raising' which is available on the Internet site charity-commission (Opens new window) or telephone the Charity Commission on 0870 3330125.
The current UK law on the VAT exemption for fund-raising events is set out in Group 12, Schedule 9 of the Value Added Tax Act 1994. The law changed significantly from 1 April 2000. The Value Added Tax Act 1994 in guidance book V1-2 'VAT law' and in Notice 701/39 'VAT liability law'.
Bodies have charitable status when they are registered, excepted or exempted from registration with the Charity Commission in England and Wales. Or are registered by the Office of the Scottish Charity Regulator (OSCR) in Scotland. Or are bodies in Northern Ireland, which are treated by the HM Revenue & Customs as charitable. Not all non-profit making organisations are charities. The term 'charity' has no precise definition in any law. Its scope has been determined by case law. You therefore need to establish whether your organisation is a charity using the following guidelines.
There is no distinction for VAT purposes between those charities registered with the Charity Commission or OSCR and those that are not. However, unregistered charities claiming VAT relief may need to demonstrate that they have 'charitable status'. This may be evident from their written constitution or by the recognition of their charitable status by HM Revenue and Customs.
Only a body corporate which is wholly owned by a charity and whose profits (from whatever source) are payable to a charity, will be eligible under this relief and may therefore qualify for VAT exemption on fund-raising events. This means that a charity's own trading company can hold fund-raising events on behalf of the charity.
Please note that the HMRC Extra-Statutory Concession does not extend to the trading companies of charities as they can shed their profits using the Gift Aid scheme.
For the purposes of this relief, 'qualifying body' means
This is explained further in the Appendix. For further information see VAT Notices 701/33 'Trade unions, professional bodies and learned societies', 701/45 'Sport and physical education' and 701/47 'Culture'.
The term 'voluntary organisation' can cover a wide range of groups and associations. Generally, they are not-for-profit organisations with a public benefit purpose and are not for the private benefit of their members. A body within the definition of a qualifying body for VAT purposes will not necessarily be a voluntary organisation.
There are a few restrictions, which are covered in the following paragraphs, to prevent distortion of competition with other organisations holding similar events which do not have the benefit of VAT exemption.
For tax purposes, it is an event clearly organised and promoted primarily to raise money for the benefit of the charity or qualifying body. Social events which incidentally make a profit do not fall within the exemption. People attending or participating in the event must be aware of its primary fund-raising purpose.
An 'event' is an incident with an outcome or a result. This means that activities of a semiregular or continuous nature, such as the frequent operation of a shop or bar, cannot therefore be an event. The relief is not intended to exempt normal trading activities from VAT.
The following are examples of different kinds of events which may be held for fund-raising purposes.
This is not an exhaustive list.
Yes. Eligible events are restricted to 15 events of the same kind in your financial year at any one location by a charity (including its trading subsidiary) or qualifying body. The restriction prevents distortion of competition with other suppliers of similar events which do not benefit from tax exemption. If you hold 16 or more events of the same kind at the same location during your financial year none of the events will qualify for exemption.
Location means in the same place. Similar kinds of events held in different locations would qualify for exemption provided all other conditions were met. For example, 20 balls held by a national charity each in different towns in the same financial year would all qualify for relief.
Clearly, events which need to be held on special premises, such as a sports ground, swimming pool or theatre are easy to define. Each of these will be accepted as a different location.
If the event is held in a complex of cinemas, theatres or concert halls, the location is the specific cinema, theatre or concert hall in which the fund-raising event takes place.
We regard a charity's entire website as a location for events held over the Internet.
The rule is designed to be generous to charities which may hold a number of events of the same type in different locations, but in the same town. We will not accept arrangements such as weekly boot sales each held in different, but adjacent fields, as constituting a separate location without considering whether such an arrangement is potentially distorting competition.
Where an event, such as a concert, is repeated on successive evenings each performance is a separate event and counts towards the maximum number of 15 allowed within the exemption. A single event which takes place at the same location for more than one day, such as a golf tournament, is accepted as one event.
Where a concert or similar event is offered as part of a travel package this may not be exempt.
See paragraph below for the VAT treatment of income for a non-qualifying event.
No. VAT exemption is mandatory for any event that fulfils all the conditions. An event which does not meet one or more of the conditions will not qualify for exemption as a fund-raising event.
No. Every event in a programme of 16 or more events will be taxable at the standard rate. The exemption applies up to 15 events of the same kind at a location. To exempt the first 15 events in a longer sequence risks distortion of competition. If you hold 16 or more events of the same kind at the same location during your financial year none of the events will qualify for exemption.
The 15 event limit does not apply to fund-raising events where the gross takings from all similar events, such as coffee mornings, are no more than £1000 per week. Such activities carried out more than once or twice a week are likely to be trading activities and not eligible for exemption, see paragraph above.
All the events in that week will not qualify as small scale events and each will count towards the 15 event allowance.
No. The £1000 limit relates to the income of the events prior to any costs being deducted.
Yes. The sale of printed matter, such as programmes and commemorative brochures or any other goods which are eligible for the zero rate relief from VAT, may still be zero-rated when supplied at a fund-raising event.
This means that a VAT registered charity or other qualifying body will be able to recover any input tax which is directly attributable to the taxable supply of those goods.
Examples of zero-rated items are
The restriction prevents distortion of competition with other suppliers of similar events which do not benefit from tax exemption. We will only use this measure where
If a commercial organisation alleged competitive disadvantage, we would look carefully into the matter and any subsequent action would depend upon the particular circumstances. A charity would have the right of appeal against the decision.
No. Any fund-raising activity which falls within the Tour Operator's Margin Scheme, such as a package of travel and accommodation, or which includes more than two nights' accommodation does not qualify for the fund-raising exemption. Further information about the Scheme may be found in Notice 709/5 'Tour Operator's Margin Scheme'.
There is no single document that you must hold to demonstrate that the event was organised primarily to raise funds. Minutes of meetings, costing and similar documents should show that the main purpose for holding the event is to raise funds for charitable purposes or a qualifying body's own benefit.
The event must be promoted in such a way that those attending the event are aware that its main purpose is to raise funds. Publicity material, tickets etc. should therefore clearly refer to fund-raising. For example
Examples of publicity material, tickets etc, should be retained to support evidence of exemption.
Charity law governs which activities charities may carry out directly and which must be conducted through a trading company. For more information you should read the Charity Commission's publication CC20 'Charities and Fund-raising' which is available on their Internet site charity-commission (Opens new window) or telephone 0870 3330125 for a copy.
You need to bear in mind the following guidance from the Charity Commission on fund-raising activities.
Your charity's governing document may mean that the charity lacks the necessary powers to undertake a fund-raising activity which is exempt from VAT and the profit of which will not be taxed. The new tax relief rules do not change that situation. Charities in England and Wales seeking power to undertake a fund-raising activity should approach the Charity Commission to see if their governing document can be amended.
If your charity has powers which appear to cover the proposed fund-raising activity the charity trustees need to consider carefully whether they in fact do so. Any body which does have the power to engage in substantial trading activities, which involve significant risk to its property is unlikely to be a charity. A charity's assets have been given for charitable purposes and should not be exposed to any serious or substantial risk of loss from fund-raising activities. Risks which might be acceptable commercially will not necessarily be acceptable for your charity to undertake directly. Large scale events such as celebrity concerts or sporting events can be a valuable way of raising funds. However, experience shows that they also carry a high degree of risk and your charity trustees should not normally undertake such activities within your charity.
The Charity Commission strongly advises trustees to take professional advice before doing anything to expand a charity's direct fund-raising activities in any way that falls outside the direct tax exemptions in place before 1 April 2000 and the revised Extra-Statutory Concession ESC C4. The best way for your charity to raise funds and take full advantage of the new tax regime is to have a wholly owned trading subsidiary which pays all its profits to your charity under the Gift Aid scheme.
No. Normal VAT treatment will apply to the goods and services you purchase.
Where an individual or an independent group holds events as part of a national fund-raising campaign such as Comic Relief, Children in Need and Blue Peter Appeals, it is unlikely that they will have charitable status or be a qualifying body. If the group does not have charitable status or is not a qualifying body the exemption would not apply to such events and the group should see VAT Notice 700/1 'Should I be registered for VAT?'. Input tax incurred on expenditure cannot be reclaimed if the individual or independent group is not registered for VAT.
A branch of a charity may or may not be a separate charity to which the exemption applies. This will depend on how the branch and its parent are set up.
Yes, but only if all the charities (including their trading subsidiaries) and qualifying bodies have organised, either individually or with others, less than 15 exempt events, of that kind, in that location, in their financial year.
Yes, but only if the charity (including its trading subsidiaries) and the qualifying body, have organised, either individually or with others, less than 15 events in their financial year.
No. Only events organised exclusively by charities, their trading subsidiaries and qualifying bodies may be exempt fund-raising events.
Events held by a charity, trading subsidiary or qualifying body which are organised by professional fund-raisers or other agents may qualify for exemption.
Generally, the VAT incurred by the charity or qualifying body in connection with an exempt event will not be recoverable. You may recover the VAT incurred in making taxable supplies within the event. This applies if the charity or qualifying body makes all the arrangements for the event.
If the agent charges or retains any part of the gross receipts, this is consideration for agency services and will be subject to VAT. This applies even if the amount is less than or equal to the cost of arranging the event.
All the income for supplies of goods and services in connection with an event is exempt, for example
Commemorative goods and souvenirs sold for a period after the qualifying fund-raising event. For example
When a fund-raising event does not qualify for exemption, it is open to a charity or any other body to set a basic minimum charge which will be standard-rated, and to invite those attending the event to supplement this with a voluntary donation.
The extra contributions will be outside the scope of VAT if all the following conditions are met.
If the publicity material for a fund-raising event suggests that those paying a recommended extra amount are more likely to be admitted than those paying merely the basic ticket price, then the extra amount becomes part of the consideration for a supply of services, rather than a donation, and as such is subject to VAT at the standard rate.
Further information about admission charges may be found in Notice 700/22 'Admissions'.
Please see Notice 701/1 'Charities' for guidance.
If you need further help and advice on any points covered by this leaflet, please contact HMRC Charities on 08453 02 02 03
To help us give the best service, always give us the full facts and if you have a detailed query please put it in writing.
You can also obtain help and advice about how to keep your VAT affairs in order from members of the tax accountancy profession. However, you do not have to employ an accountant, but if you choose to do so, responsibility for the accuracy of your VAT affairs remains with you, the registered person.
Naturally we hope this question will not arise, but, with many thousands of enquiries every day, misunderstandings and errors can happen.
If you have a complaint about the way in which we have handled your affairs, first write to the officer in charge of the office concerned. He or she will then do everything possible to resolve the problem quickly.
If the HMRC does not settle your complaint to your satisfaction, you can ask the Adjudicator for HM Revenue & Customs to look into it and recommend appropriate action.
The Adjudicator, whose services are free, acts as an impartial referee where people feel their affairs have been badly handled. The Adjudicator's recommendations are independent. The address is
The Adjudicator's Office Haymarket House 28 Haymarket London SW1Y 4SP
Telephone: 020 7930 2292 Fax: 020 7930 2298
Finally you can ask a Member of Parliament to refer your complaint to the Independent Parliamentary Commissioner for Administration, commonly known as
the 'Ombudsman'. Further information is available from
1. Are you
2. Is the event being held primarily for the purpose of raising funds and is this being made clear in the publicity for the event or on the tickets?
3. Are all the funds raised by the event
4. Is the event one of 15 or less of that kind being held at the location during your financial year?
5. Does the event fall within the Tour Operator's Margin Scheme?
If the answer to any of the questions 1 - 4 is 'no', or the answer to question 5 is 'yes', the event does not qualify for exemption.
These notes are for guidance only and reflect the position at the time of writing.
They do not affect your right of appeal about your tax, National Insurance or VAT.