Guide to VAT for UK charities including registration, exemptions, and reclaiming VAT on charity expenditure. Understand how VAT affects your charity.
VAT can be complex for charities. While charities enjoy certain VAT reliefs, understanding what's taxable, what's exempt, and what can be reclaimed is essential for proper financial management.
Many charity supplies are exempt from VAT, meaning the charity cannot charge VAT but also cannot reclaim VAT on its purchases. However, some charity activities are standard-rated and require VAT registration.
The VAT reclamation scheme allows eligible charities to reclaim VAT on purchases, even if not registered for VAT. This can provide significant refunds, particularly for charities with substantial expenditure.
Register for VAT if taxable supplies exceed the threshold (£90,000). Some charities may choose to register voluntarily to reclaim input VAT.
Eligible charities can reclaim VAT through the VAT reclamation scheme. This applies to VAT on goods and services used for non-business activities.
Some charity supplies are zero-rated including donations, membership fees for charities, and certain goods donated for sale.
Common mistakes include incorrectly treating exempt income as taxable, missing reclamation deadlines, and failing to maintain proper records.
Our specialist charity accountants can help you understand VAT and maximise reclaimable amounts. Contact us today.