Charities usually follow the same VAT rules as any other organisation. But they can claim various reliefs and exemptions, as long as they qualify.
What should you expect when dealing with charity VAT?
The first thing to bear in mind is that charities and not-for-profits are treated differently. While charities are always non-profit making, non-profit organisations are not always charities.
How to qualify for charity VAT status
To qualify for reliefs and exemptions, you have to be either registered with the Charity Commission for England and Wales or, if you’re exempt from registration or a Scottish or Northern Irish charity, formally recognised as a charity by HM Revenue & Customs.
- If your turnover from taxable business activities for the last 12 months is above the VAT registration threshold, you need to register for VAT.
- You can voluntarily register the charity for VAT when your turnover from taxable business activities is below the registration threshold, too.
- If your taxable income isn’t high enough to register and you don’t want to do it voluntarily, you need to keep a careful eye on things and register as soon as you go over the limit… or ideally well before!
- When a charity doesn’t have any business activities or they are VAT exempt, there’s no need to register for VAT.
What is a ‘business activity’ in a charity context?
If your charity sells goods or services, that’s counted as a taxable business activity, even if the goods or services support your charity’s aims. But there are limits to what’s taxable and what isn’t.
Need support with charity VAT?
HMRC have tried to keep things as simple as possible, bless them, but their version of ‘simple’ isn’t always the same as ordinary people! The fine detail behind VAT is enough to drive us to tears, madness and strong drink. Which is where people like me come in. If you need support with charity VAT or any other kind of VAT, no matter how gnarly, I can either teach you how to do it or do it for you.