VAT for charities

With the VAT rate increase and the continuing withdrawal and watering down of VAT concessions it is essential you have a VAT adviser that not only has the technical experience in advising this sector but appreciates your individual aims and objectives.

This allows for practical VAT advice centred around your individual organisation to assist in maximising VAT efficiency and minimising VAT as a cost. Some of the key VAT issues affecting this sector are:

Property issues

  • With the recent withdrawal of the 10% margin for qualifying use in respect of properties to be used by charities or not-for-profit making organisations it is more important than ever before to seek concise effective advice in relation to any property transaction.
  • Consideration must also be givven to the option to tax and the potential for this to be dis-applied in whole or in part thereby avoiding or minising a VAT charge that at best may only be partially recoverable.
  • The VAT issues surrounding the construction of village halls or recreational buildings for local communities can be particularly complex and the ability to secure zero-rating for the building works should be fully explored.
  • How we can help - We will explore in detail the potential to acquire new property interests, building works, or conversions to form Relevant Residential buildings at the VAT zero-rate.
  • These require specific VAT certification and have the force of law. We can assist you in respect of these certificates, and seek to ensure zero-rating is applied to minimise VAT costs.


  • Where there are any business activities or trading subsidiaries, this can create a whole host of issues in themselves that need careful planning and management.
  • We have experience of reviewing these contracts and providing advice on the VAT position. Where we are brought in before a contract for a grant funding has been signed we can assist and confirm the VAT position, liaising with the funder as necessary, to advise on any significant VAT issues that have not yet been considered.
  • It is also important to consider any grant funding received, as this can in some cases be considered by HMRC as busienss income. This is particularly important as some contracts from grant providers will stipulate that should HMRC consider the funding constitutes a supply for VAT purposes, that the funding will be considered to be inclusive of VAT. Should this occur then it will severally affect the funds avilable to be used to deliver the service funded by the grant.

VAT liabilities

  • The VAT liabilities of services and goods supplied by charities and not-for-profit organisations can become complex, and it well not always be obvious where savings can be made and utilised.
  • Memberships and subscriptions should be closely monitored to confirm the VAT position and where applicable maximise VAT efficiency.
  • How we can help: - We can assist in advising on the VAT position for memberships and subscriptions to avoid the potential for a subsequent dispute with HMRC. Where appropriate we can seek a ruling from HMRC on the VAT position with a view to maximising the VAT efficiency for these services.

Partial exemption

  • If there are trading activities and some of these are exempt from VAT, then the partial exemption position should be reviewed and where appropriate a special method agreed with HMRC.
  • How we can help: - Operating closely with HMRC we can review this on your behald increasing the ability for you to take advantage of your partial exemption position.

VAT recovery in general

  • It is important to ensure the utmost VAT recovery to assist in reducsing costs and maximising funds available for the aims and objectives of the charity or not for profit organisations. Where this is expected to be any large capital expenditure advice should be sought to ensure that any reliefs available are used and that the best possible structure is used to maximise VAT recovery.
  • How we can help: - We will conduct regular reviews with you to evaluate ways that VAT savings can be identified.

Fund raising

  • There are specific rules governing what constitutes fund raising and the level to which these activities can be exempt from VAT.
  • How we can help: - We will be able to help you advise your fund raising activities can be undertaken in the most VAT and cost effective method.

Donations and sale of goods donated

  • Donations freely given with nothing provided in return are outside the scope of VAT. Care must be taken when anything can be considered as provided in return for donation. Also when accepting donated goods from members of the public or busiensses that  are resold to raise funds.
  • How we can help: - We will be able to help you advise your fund raising activities can be undertaken in the most VAT and cost effective method.

International services

  • For services that are received from overseas, with effect from 1st January 2010 there is a requirement to account for the VAT in the UK under the reverse charge procedures when the services are received for business and non-business purposes. Prior to 1st January 2010 HMRC did now seek to apply the reverse charge when the services were received for non-business purposes. This will mean an additional VAT cost.
  • How we can help: -We will sit down with you and review contracts for the provision of services from overseas suppliers to find any alternative solutions and discuss these with you.

VAT grouping

  • FThere may well be changes for VAT groups between trading subsidiaries and a charity or not-for-profit entities. This may make it more difficult for this sector to use the advantages of VAT groups.
  • How we can help: - We will review any changes as they are made and consider what steps can be taken to avoid any negative impact for this sector.

Cost sharing

  • The Government is finally looking at the possibility of exemption from VAT (as provided for under European VAT legislation) for cost sharing between charities and not-for-profit organisations.
  • How we can help: - We are monitoring this and as soon as there is any progress we will consider how this can be implemented and the benefit maximised for this sector.