A VAT-registered business can sell certain goods and services to charities at the zero or reduced rate of VAT.
As it can be quite complex for charitable organizations, we have prepared a guide to help you understand VAT implications of running a charity.
Please note that it is your responsibility to check whether the charity is eligible and apply the correct rate.
Are charities exempt from VAT?
No. Charities are not exempt from VAT.
They must register for VAT with HMRC if its VATable sales are over the VAT threshold.
How can you check whether the charity is eligible for zero or reduced rate of VAT?
To ensure that the charity is eligible, you can ask them for:
- A proof that shows that they are a charity
- A written statement or ‘certificate’ confirming that they meet the conditions for the VAT relief
How can a charity show evidence of its charitable status?
A charity can show proof of its charitable status by either giving its:
- Charity Commission registration number
- A letter of recognition from HMRC if its not registered with the Charity Commission for England and Wales
Are charities required to make a written declaration?
When supplying eligible building or construction services at zero VAT, charities are legally required to give you an eligibility certificate.
While a declaration is not legally required for other items you sell at the zero or reduced rate, it should be asked for to prove the charity is eligible for the relief.
Please note that the written declaration should be separate from the order form or invoice for the goods or services the charity is buying.
Also, you need to keep the completed declarations for at least 4 years.
When can you apply a reduced VAT rate?
When selling fuel and power to an eligible charity in some circumstances, you can apply the reduced VAT rate.
Which items qualify for zero rate?
You can apply zero VAT when selling the following to an eligible charity:
- drugs and chemicals
- medicine or ingredients for medicine
- aids for disabled people
- resuscitation training models
- construction services
- advertising and items for collecting donations
- equipment for making ‘talking’ books and newspapers
- lifeboats and associated equipment, including fuel
When can you zero-rate equipment for medical and veterinary use?
You can zero-rate some other medical and veterinary equipment when selling to:
- charities providing transport services for disabled people
- charities providing rescue or first aid services to humans or animals
- charities providing institutional care, medical or surgical treatment for chronically sick or disabled people
- not-for-profit research institutions
- certain health bodies, e.g. NHS Trusts
- someone buying it specifically for donation to one of these bodies
Please note that the money used to buy the equipment must be from charitable or donated funds.
Additionally, this should be stated on the eligibility declaration too.
What items are eligible under equipment for medical and veterinary use?
The following is a list of eligible items:
- rescue equipment
- motor vehicles for medical use
- goods for disabled people
- medical, veterinary, and scientific equipment
- resuscitation training dummies
Get in Touch
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As always, you can reach out to us anytime to discuss any financial issues you may have in this coronavirus pandemic.