VAT

“Charities don’t pay VAT” is one of the most persistent and expensive myths in the sector. Charities pay VAT like anyone else on most purchases. What exists is a set of specific reliefs, each with its own conditions.

The reliefs apply whether or not the charity is VAT-registered — but they do not apply automatically. The charity must give the supplier a written eligibility declaration, and the supplier must keep it. Without the declaration the supplier charges the standard rate, and recovering it afterwards is usually not possible.

The main reliefs cover advertising placed in third-party media (zero-rated), fuel and power for qualifying non-business use (reduced rate), charity-funded equipment, and goods for disabled people. Each has conditions. See VAT reliefs, and use the free HMRC charities helpline for a specific purchase.