Sector summary ― charities

Produced by a Tolley Value Added Tax expert

Value Added Tax

Guidance

This guidance note provides a summary of key VAT issues of relevance to the charity sector.

Areas covered include:

•
an introduction to the sector
•
the VAT meaning of a charity
•
business and non-business activities
•
the link between supply and consideration (including grants, donations and sponsorship)
•
the VAT liability of a charity’s business supplies
•
registering for VAT
•
VAT reliefs for charity expenditure
•
land and property
•
the implications of incorrectly claimed VAT relief
•
VAT recovery - including non-business expenditure, partial exemption and the charity special refund scheme
•
key case law

Introduction to the sector

Amongst non-VAT specialists there is sometimes, an assumption that charities do not pay VAT or are not really affected by VAT. This assumption is false.

The charity sector faces some of the most complex VAT issues of any part of the economy.

In addition to other considerations, a typical charity will have to make difficult technical decisions about:

•
whether income is derived from a ‘business’ activity
•
the

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