Charities ― recovering VAT and VAT reliefs

By Tolley
VAT_tax_img

The following Value Added Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Charities ― recovering VAT and VAT reliefs
  • VAT recovery
  • VAT reliefs

This guidance note provides an overview of VAT recovery for charities and of the various VAT reliefs that are available to charities aimed at reducing the amount of irrecoverable VAT they incur. The note should be read in conjunction with the Charities ― overview guidance note.

Notice 701/1 ; De Voil Indirect Tax Service V6.185 (subscription sensitive); VCHAR1000
VAT recovery

Charities may have a mixture of taxable, exempt and / or non-business activities as set out in the Charities ― overview guidance note. This can make their VAT recovery position particularly complex as VAT is normally only recoverable when it is used for making taxable supplies.

VATA 1994, s 26

Broadly, charities with a mixture of all of these types of activities will determine how much VAT they can recover as follows:

StageProcessVAT treatment
1identify VAT which can be treated as input taxVAT cannot generally be recovered on any costs incurred that relate to non-business activities as this is not properly input tax so the charity must first identify how much VAT relates to its business activities
2undertake a

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