VAT Housekeeping for Charities

VAT can be a complex area for charities from determining how to treat your income to minimising the impact of VAT on purchases. We have set out below some items for consideration when performing your VAT housekeeping.

Reliefs and reductions:
There are certain VAT reliefs and reductions available to charities to ease the pain and we encourage  charities to ensure they are taking advantage of these.

  • Fuel & Power

Charities can claim the reduced rate of VAT where fuel and power is used for use in charitable non-business activities. Where a charity has both business and non business income, the relief can be applied in part.

  • Advertising

The supply of advertising to a charity is zero-rated. The relief also extends to pre-printed collecting boxes, envelopes and appeal letters and low cost lapel stickers, emblems and badges.

  • Disabilities

Goods and services made available to disabled people for their personal or domestic use are zero-rated. In certain circumstances a charity can also benefit from zero-rating for the construction of a ramp, widening a doorway or passage, or providing, extending or adapting a washroom or lavatory.

  • Construction

Construction of buildings, and certain works to protected buildings, intended to be used solely for  non-business purposes or as a village hall or similar can be zero-rated subject to certain criteria being met.

  • Medical or veterinary research

Substances directly used for testing, or for mixing with other substances in the course of that research can be purchased at the zero rate. Talking books or newspapers for the blind and severely visually impaired. Purchases of sound recording and reproduction equipment (or parts and accessories for such  equipment) that has been designed or specially adapted for recording or reproducing speech on magnetic tapes for the benefit of such persons can be zero rated.

  • Rescue services

Many goods and services purchased in relation to the vessels can be purchased at the zero rate. Specialist communication, light enhancing and heat detecting equipment can also be purchased at
the zero-rate.

  • Goods to be donated to an eligible body

Purchases by a charity that will be donated to an eligible body can be zero-rated.

  • Treatment or care of people or animals

A charity that is involved in the above, or in medical or veterinary research, can purchase medicinal products at the zero rate.

  • Resuscitation training models

The supply of a resuscitation training model that is to be used in first-aid training in cardiopulmonary resuscitation or defibrillation techniques is zero-rated.

In addition to the above reliefs and reductions, charities that have taxable income will also be able to claim VAT incurred that directly relates to that income but also a portion of its overheads as these will, in part, be used in the making of those taxable supplies.

We advise that charities review their income to ensure it is categorised correctly and review their VAT return calculations to ensure that they are claiming as much VAT as they are entitled to.

For more information please contact Alison Birch on 0161 817 6100, or send her an email.

Registered to carry on audit work in the UK and Ireland by the Institute of Chartered Accountants in England and Wales and authorised and regulated by the Financial Conduct Authority for investment business