Can charities claim back VAT?
Assuming the charity is VAT registered it may reclaim VAT on any purchases that are directly related to any VAT-taxable goods or services it sells.
However, VAT-Registered charities are quite rare as the vast majority of their income will be exempt and therefore outside the scope of VAT. In the case of non VAT registered charities there is VAT relief available in which they can receive certain goods and services at a reduced (5%) rate or zero rated.
This means a company making a sale to a charity can effectively sell for the net price as it won’t need to charge VAT on the sale. The charity therefore makes the saving here, rather than claiming the VAT back at the end of the quarter as a normal company would.
The full list of goods and services that are eligible for relief can be found under section 6 of the following document here.
An eligibility declaration must be completed by the charity for each of the reliefs. It is the supplier’s responsibility to make sure that the correct VAT rate is applied. They must take reasonable steps to check with the charity any condition that they cannot verify for themselves. Any additional verifications carried out should be recorded and kept with the declaration of eligibility. A charity must give its supplier evidence that it is a charity. If asked for further evidence the charity must be able and willing to give it before VAT relief can be given.
If you would like any further clarification please do not hesitate to contact us.
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