VAT – How it affects Charities

There is no blanket exemption for charities from VAT. Like everyone else you will be charged VAT on many of your purchases and if you make taxable supplies by way of business you may be liable to register for VAT just as any other business. There are, however, some VAT reliefs on certain goods and services which you might purchase and on income from qualifying fundraising events.

Should you be registered for VAT?

As a charity your income might come from a number of sources. It might be from non-business activities (for example, from purely voluntary donations) or business activities (for example, by charging for goods or services) or a mixture of both. If you do have business activities the supplies you make might be taxable. If the income from your taxable supplies exceeds the VAT registration threshold you will be liable to register for VAT.

If the value of your taxable supplies is below the registration threshold you can, if you wish, choose to register voluntarily. This would mean that you would have to charge VAT on the taxable supplies you make but would be entitled to reclaim any VAT that you are charged on purchases relating to those supplies, subject to the normal VAT rules. You cannot reclaim VAT on any purchases, which relate directly to your non-business activities. You would need to think carefully about the implications of registering voluntarily and whether or not this would benefit you.

For help in deciding whether your activities are 'business' or 'non-business' and whether your business activities are ‘taxable’ see Notice 701/1 Charities. For more information on whether or not you should be VAT registered see Notice 700/1 "Should I be registered for VAT?"

VAT reliefs for charities and other qualifying bodies
There are some VAT reliefs available to charities and other qualifying bodies on the VAT charged when you buy certain goods and services whether or not you are registered for VAT. For information on these reliefs, and what we mean by 'qualifying body', see Notice 701/1 Charities.

Fundraising events

Certain types of events organised primarily to raise money for the benefit of a charity are exempt from VAT, subject to certain conditions. The exemption covers admission fees for the event and other income generated at the event. For information on the types of events, which are eligible and the extent of the exemption see Notice "Fundraising events: Exemption for charities and other qualifying bodies".

Help and advice

If you need further information or advice on any of the above, or any other tax issue affecting charities, you can call the HMRC Charities Helpline on 08453 02 02 03.