VAT can be a complex area for charities from determining how to treat your income to minimising the impact of VAT on purchases. We thought we would take this opportunity to cover some VAT housekeeping for charities.
Reliefs and reductions
There are certain VAT reliefs and reductions available to charities to ease their financial burden, 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 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 intended to be used solely for non-business purposes or to be used in a similar way to a village hall (e.g. social and recreational use for the local community) can be zero-rated subject to certain criteria being met.
- Rent – If a charity incurs VAT on rent from its landlord it is because the landlord has opted to tax its interest in the property. This option to tax can be disapplied where the premises are used for non business purposes or in a similar way to village hall. If it is used partly in this way, the option to tax can be disapplied in part.
- 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.
- 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.
- Goods to be donated to an eligible body – Purchases by a charity that will be donated to an eligible body can be 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: