Can Charities Claim Back VAT?

can charities claim back VAT

VAT is already known to be complicated to handle but when it comes to charities and the relevant organisations, the procedure becomes more complex. People often wonder whether can charities claim back VAT, this is the point of discussion in this article. If you are also the one who is looking for answers, you are on the right page. This guide will help you to gather information about what are the VAT implications when you are running a charity organisation. Because this is very important to be on the right side of the HMRC in this regard.

Further in the discussion, you will find out the facts about if charities are exempted from VAT or not, how can you register for VAT as a charity organisation, what is the VAT relief for charity, and whether can you claim back the VAT.


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Are Charities Considered to be Exempted from VAT?

This is a myth that charities can be exempted from the values added tax implications. The way any other organisation that is non-charity is required to regret VAT with HMRC, and the charity organisations will follow the same rule and requirements. One certain requirement is that you become liable to get registered for VAT when the level of threshold is crossed for any kind of organisation. So the requirement is to have an idea of the procedure to follow and to get your organisation registered for VAT.


What to Do after VAT is Registered for Charities?

After the organisation is registered for VAT, the charity is allowed to start charging the VAT on the services and products it is offering. It will be further required to submit the VAT return within the limit of three months. There are several options for MTD-compatible VAT software that can help you with the online process. You can even use online calculators to have an idea of the payment and get accurate calculations before you aim to pay the amount. When the sales are below the figure of £85,000, the charity organisation should still choose to register for VAT. This process will later help to claim the VAT charged on the purchase of goods and other relevant supplies.


What is VAT Relief for Charities?

There is an exception with the charities that even if they are not yet VAT registered, they are allowed to ask the employees to charge the VAT on the goods and services at the lowest rate which is 5% or zero rates rather than charging the full rate. However, the goods and services are specific on which the VAT can be charged when the organisation is not registered for VAT.

The products or other relevant stuff that a charity organisation has to import from outside of the EU is exempted from the VAT implications. The other clubs like the community amateur sports clubs do not come under any such category that makes them exempt from the VAT implications like the charity organisations. Important details of the relief are listed below:

  1. When the resources are used for non-business activities for the charity organisation, a reduced rate of 5% VAT will be offered for the relevant expenses of fuel and power.
  2. Free childcare is one example of a non-business activity of the charity.
  3. Care home, children’s homes and residences for caretaking are also expected from the VAT implications.
  4. The charity can also avail of zero rates for a large number of goods and services. Medical supplies, scientific equipment, and rescue equipment are a few examples in this regard.


Can Charities Claim Back VAT?

It is possible for charity organisations to get the zero rate or the reduced rate to purchase the needful products and services as mentioned earlier as well. However, this is required for the charity organisations to give solid evidence to the suppliers to prove the status of the charity. If the letter of recognition is available that is sent by HMRC, it works more than enough in this regard. If the charity organisation is located in England, the Charity Commission registration number will do the needful.

Moreover, the certificate of declaration is also valid to be used when you apply for the relief, this will help to confirm the eligibility status. HMRC provides several examples of the certification of the services and products you are offering.


The Bottom Line

Now that you have gathered a fair amount of information about ‘can charities claim back VAT’, we can bring the discussion towards wrapping up. The set of rules related to the VAT and its implications is quite flexible when it comes to charity organisations. However, you will have to take care of the regulations to avail yourself of the reduced rates for your services and purchases. We hope these few minutes of reading will help you to develop a better understanding of charities and VAT claims back.


VAT rules become tricky when you have a higher chance of making an error in your submission. Our professional and detail-oriented advisors can help you! Get in touch with us for charities to claim back VAT.


Disclaimer: All the information provided in this article on whether can charities claim back VAT, including all the texts and graphics, is general in nature. It does not intend to disregard any of the professional advice.