In this section:
- How VAT applies to charities and not-for-profit organisations
- Zero-rated VAT on charity-funded goods or services
- How VAT applies to charity fundraising
- Reduced VAT on gas and electricity used for charity purposes
- How charities can import goods VAT free
Zero-rated VAT on charity-funded goods or services
You can buy certain specific goods and services without having to pay VAT, if either you're an eligible body and you're paying with charitable or donated funds, or you're buying them in order to donate them to an eligible body.
This guide will help you understand whether you are an eligible body, and what goods and services can be bought free of VAT. It will explain how you need to provide evidence to your supplier to allow them not to charge you VAT. It also tells you about certain restrictions and other conditions that have to be met so VAT doesn't need to be charged.
If you are a supplier, it will help you work out whether you can zero-rate a particular sale of goods or services. It also tells you what evidence you need to get from your customer.
On this page:
- Basic conditions for zero-rating
- What is an eligible body?
- Goods and services that qualify for zero-rating
- Restrictions on purchases by eligible bodies
- Funding and purchasing
- Evidence
- Imports, exports and intra-EC supplies
Basic conditions for zero-rating
The conditions for zero-rating are as follows. Each condition is explained more fully later in this guide, along with links to further details where necessary.
Eligible body. Only certain kinds of organisation - known as 'eligible bodies' - can make these purchases without paying VAT.
Qualifying goods or services. Only certain goods and services, as well as the repair and maintenance of those goods, can be bought without paying VAT.
Restrictions. For certain kinds of eligible body, there are additional restrictions on what they can buy without paying VAT, and how they can use it.
Medical and scientific equipment. If the purchase is of medical, scientific, computer, video, sterilising, laboratory or refrigeration equipment, it must be being purchased to be used mainly for medical or veterinary research, training, diagnosis or treatment.
Payment. If the goods are being purchased by an eligible body, they must be paid for using charitable or donated funds.
Evidence. The purchaser must provide the supplier with a valid declaration of eligibility, and/or sufficient evidence to demonstrate eligibility for the relief.
As well as the specific types of goods and services covered in this guide, a charity may be able to make other purchases free of VAT.
Read more about what a charity can purchase free of VAT
What is an eligible body?
You can buy qualifying goods and services without paying VAT if you are one of the following, and as long as all the other conditions are met:
- certain health bodies
- research institutions whose activities are not carried on for profit
- certain charitable institutions
In addition, no matter what person, group or organisation you are, you won't have to pay VAT if you're buying goods or services specifically in order to donate them to one of the bodies listed above.
Goods and services that qualify for zero-rating
If you are an eligible body and you buy any of the following equipment and it's going to be used by you mainly for medical or veterinary research, training, diagnosis or treatment, then you won't have to pay VAT. However, there are restrictions on what some eligible bodies can buy, listed in the next section.
- medical equipment
- scientific equipment
- computer equipment and certain software
- video equipment
- sterilising equipment
- laboratory equipment
- refrigeration equipment
Parts or accessories for use with any of the above equipment also qualify.
The following are also qualifying goods:
- ambulances and parts/accessories for use in or with ambulances
- certain goods for use by a disabled person
- certain motor vehicles
- certain rescue equipment when purchased by, or for donation to, a charity providing rescue or first aid services
- certain resuscitation models for use in first aid training
- repair, maintenance or installation of qualifying goods, and any goods supplied in connection with this repair, maintenance or installation
Restrictions on purchases by eligible bodies
Even if you are an eligible body, and the goods or services are on the qualifying list, you might still have to pay VAT.
If you are a charitable day centre, or a charitable establishment providing care or medical or surgical treatment, then you can only buy qualifying goods or services free of VAT it they're for use within the day centre or care establishment itself. You'll have to pay VAT on goods or services that you buy for more general use.
If you are a charitable domiciliary care provider, then the list below shows the only things you can buy without paying VAT. You'll have to pay VAT on all other qualifying goods and services.
- medical equipment that is used in the course of domiciliary care
- parts or accessories of such medical equipment
- repair or maintenance of such medical equipment
Funding and purchasing
The money you use to pay for the goods or services must be charitable funds, and/or from voluntary donations or contributions, otherwise you'll have to pay VAT on the purchase.
Alternatively, if someone else buys the goods or services specifically to donate them to you, they won't have to pay VAT. However, this doesn't apply to computer software, and only applies if you are an eligible body.
Charitable funds, voluntary donations and contributions
If a charity buys goods with its own funds, the purchase is made with charitable funds.
Where a person, group or organisation contributes funds to an eligible body, and does not receive anything in return, this is a voluntary contribution or donation. Lottery funding is also regarded as a voluntary contribution for the purposes of this relief.
However, if you are an eligible body but not a charity, and you contribute to the purchase from your own resources, you'll have to pay VAT, even if the supply is of qualifying goods or services.
National Health Service funds are not charitable or donated, and any goods or services purchased with these funds will attract VAT.
Goods or services bought for donation to an eligible body
Anyone - any person, body or organisation - can buy qualifying goods and services without paying VAT, as long as they're buying them specifically in order to donate them to an eligible body. Whoever buys the goods or services will need to give the supplier an eligibility declaration, and it will have to show not only their own details, but also details of the eligible body they're going to donate the goods or services to.
This only applies to the qualifying goods or services shown here, and only for donation to the specific types of eligible body listed here. If someone's buying goods or services for donating to a charity generally - even if that charity would be able to buy them VAT-free itself - they'll have to pay VAT.
If a charity sells, lets or exports goods that have been donated for that purpose, the supply of the goods will be taxable, but at the zero rate.
Evidence
If you are a supplier, you need to see evidence before you can zero-rate a supply of qualifying goods to, or for donation to, an eligible body.
It's your responsibility to ensure that all the conditions for zero-rating are met. Ideally, you should obtain a written declaration of eligibility from your purchaser. The declaration should be separate, or clearly distinct from, any order or invoice for the purchase.
The declaration should include enough information to show that all the conditions for zero-rating have been met. The evidence needs to be specific and detailed, and you must keep it with your records.
Imports, exports and intra-EC supplies
Imports from outside the European Union (EU)
If you import goods from outside the EU, then normally you'd have to pay VAT at the time of importation. However, if they're qualifying goods, and you're an eligible body - or you're buying the goods to donate them to an eligible body - then as long as all the other conditions in this guide are met, you won't have to pay any import VAT.
Acquisitions from another EU country
If you're registered for VAT and you acquire goods from another EU country, you are responsible for accounting for VAT on their purchase. Therefore, if you are an eligible body buying qualifying goods from another EU country, using charitable or donated funds, then this purchase will qualify for the zero rate, and you won't have to pay any VAT. You don't have to provide the purchaser with an eligibility declaration, but you do have to retain the evidence that the goods were eligible for zero rate.
If you aren't VAT registered, you'll have to pay VAT according to the rules of the country you buy the goods from. Remember that if you aren't registered for VAT and your acquisitions exceed the annual acquisitions registration threshold - currently £67,000 - you'll have to register.
Read more about when you have to register for VAT
Selling goods outside the UK
An eligible body doesn't have to be based in the UK - it can be anywhere in the EU. So if you're supplying goods or services to an eligible body in another EU country, and the body isn't VAT registered in that country, then if all the other conditions are met you can zero-rate the supply.
However, health boards in other countries aren't eligible for this relief.
Supplies of goods to eligible bodies that are registered for VAT in other EU countries, and exports to countries outside the EU, are zero-rated anyway under the normal single market or export rules.
