VAT Relief For Charities

VAT taxCharities pay VAT on all standard-rated goods and services they buy from VAT-registered businesses.  As a charity you do not pay VAT when you buy some goods and services

What qualifies for the reduced rate

Your charity pays 5% VAT on fuel and power if they’re for:

  • residential accommodation (for example, a children’s home or care home for the elderly)
  • charitable non-business activities (for example, free daycare for disabled people)
  • small-scale use (up to 1,000 kilowatt hours of electricity a month or a delivery of 2,300 litres of gas oil)

If less than 60% of the fuel and power is for something that qualifies, you’ll pay the reduced rate of VAT on the qualifying part and the standard rate (currently 20%) on the rest.

Qualifying fuel and power includes gases, electricity, oils and solid fuels (such as coal). It does not include vehicle fuel.

What qualifies for the zero rate

Find out about the conditions you must meet so that your charity pays no VAT (the zero rate) when you buy:

VAT-free goods from outside the UK

Charities do not pay VAT on goods imported from outside the UK as long as they’re benefiting people in need by providing:

  • basic necessities
  • equipment and office materials to help run your organisation for the benefit of people in need
  • goods to be used or sold at charity events

You can check which goods you can claim VAT relief for as well as how to claim.

Making Tax Digital

Image result for Making Tax DigitalMaking Tax Digital is a key part of the government’s plans to make it easier for individuals and businesses to get their tax right and keep on top of their affairs.

HMRC’s ambition is to become one of the most digitally advanced tax administrations in the world. Making Tax Digital is making fundamental changes to the way the tax system works – transforming tax administration so that it is:

  • more effective
  • more efficient
  • easier for taxpayers to get their tax right

VAT-registered businesses with a taxable turnover above the VAT threshold are now required to use the Making Tax Digital service to keep records digitally and use software to submit their VAT returns for VAT periods that started on or after 1 April 2019.

HMRC provides a wide range of digital services and support for businesses and the self-employed.

Charities and VAT – Energy Charges is a complicated issue, but we give a brief overview here

Charities have to pay VAT on supplies of fuel and power. However charities can claim the reduced rate where fuel and power is supplied for a qualifying use. Qualifying use means either:

  • supplied for use in a dwelling or certain other types of residential accommodation, such as a children’s home, hospice or care home for the elderly or disabled
  • supplied for use in charitable non-business activities, such as free day care for the disabled

Additionally, deliveries of certain small quantities of fuel and power are automatically treated as being for a qualifying use. For example, electricity supplied at a rate not exceeding 1000 kilowatt hours a month or a delivery of not more than 2300 litres of gas oil, will qualify for the reduced rate whatever the use of the building.

If the fuel and power is supplied partly for a qualifying use the supplier may have to apportion the supply. Charities should provide the supplier with a certificate declaring the percentage of the fuel and power that will be used for a qualifying purpose.

You can find more detailed information here