Value Added Tax and charities

There are hundreds of pages of VAT legislation, however, we have focussed on areas where changes may have occurred in responding to the current situation, which we felt may be of more relevance at this time.

Taxable supplies made by charities 

• Donations – these fall outside of the scope for VAT as long as nothing is provided to the Donor in return.
• Grants – these fall outside of the scope for VAT, again, only where nothing has been provided to Grantor in return.
• Deemed sale for VAT – goods have been purchased and VAT recovered; subsequently some of goods are given away free of charge, a deemed sale has occurred to restrict input VAT recovery and should be recognised on the VAT return.
• Fundraising – an exemption is available for fundraising events which are primarily to raise funds for the charity and is subject to specific criteria; this allows recovery of input VAT but no onward charge of output VAT.
• Zero-rated supplies – sale, letting or hire of donated goods if in accordance with purpose donated and available to general public or specified individuals.
• Notional fees – non-commercial charge for provision of goods / service is economic activity for VAT purposes. Counts towards taxable supplies.

You are required to register for VAT at the end of the month following the month in which your taxable supplies in the previous 12 months exceeded the VAT threshold (£85,000 as at 1 April 2020). However, if you have only zero-rated supplies, then you can opt not to register, but you will not be able to recover input VAT on purchases.

If you have any questions or need further information, please contact Geoffrey Cox, Deborah Austin, Brian Jukes or Lucy Hatton in our specialist Charity team.