Commentary

V7.466 Charities—VAT liability of a charity's income

Part V7 Tax planning
Part V7 Tax planning | Commentary

V7.466 Charities—VAT liability of a charity's income

Part V7 Tax planning | Commentary

V7.466 Charities—VAT liability of a charity's income

General principles

Many charities have a wide range of income sources – and each source of income needs to be considered in order to determine the correct VAT liability. Income can be generated by a charity through the supply of goods or services – or it could be income generated without a supply being provided, for example, donations from private individuals or local companies.

As a word of caution, be aware that certain sources of income could be standard-rated if supplied by a trading subsidiary of the charity.

It is important to remember the logical approach to adopt in order to assess the VAT liability of a particular supply.

  1.  

    •     Is the supply specifically zero-rated under any of the 16 groups listed in VATA 1994, Sch 8?

  2.  

    The main group in the Schedule that is relevant to the income of a charity is Group 15 – Charities etc.

  3.  

    •     Is the supply specifically exempt from VAT under any of the 15 groups listed in VATA 1994, Sch 9?

  4.  

    The main groups that could be relevant to the income of charities are as follows:

  5.  
    1.  

      –     Group 7 – Health and welfare

    2.  

      –     Group 12 – Fundraising events organised by charities and other qualifying bodies

    3.  

      –     Group 13 – Cultural services – admission to museums, exhibitions, zoos and performances of a cultural nature supplied by public bodies and eligible bodies

  6.  

    •     Is the income specifically outside the scope of VAT?

  7.  

    The main sources of income that

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