Fund-raising: the VAT tangle

VAT is the most complex of the taxes that a company will have to deal with. And when you add in charitable activities, it adds a whole other layer to the complexity!

Here's an example - ITV recently organised a concert to raise money that would support the Disasters Emergency Committee's Ukraine Humanitarian Appeal. HMRC decided to waive the VAT so that all the money raised went into the charity fund. Does that mean that charitable events can be organised ignoring VAT?

No!

That particular event was a one-off decision applied by HMRC to that particular case. Effectively, they donated the VAT collected, but that doesn't mean that, as a VAT-registered business you can give VAT on your charitable fund-raising efforts a swerve.

The British are generous and, when the call goes out for emergency funds, they rise to the challenge. As a nation we raise billions for various charities, whether that's a few pounds or substantial sums. But when you're organising a fund-raising event, you need to know the rules.

People want to help when there are humanitarian emergencies - and business owners are often keen to offer support. However, there are a few things to be aware of if you're planning a fund-raiser.

  1. All costs of setting up the event that are VAT-able, must be paid including the VAT and included in your next VAT return.
  2. Ticket sales will incur VAT - and must be declared in your VAT return.
  3. Donations of goods in kind e.g. for a raffle or auction, are - mostly - not subject to VAT, If you're the organiser of a charity event, as long as you have a written undertaking that all funds generated by the event will be donated to a specified charity. Our advice is to check out the details or get advice before going ahead.
  4. Donations of services are usually not a monetary transaction and are generally a promise rather than actual chargeable items and, therefore, don't involve VAT.

As the saying goes:

No good deed goes unpunished.

Is there a way around the VAT issue so the charity benefit is increased? If it's a cash donation made directly to the charity, then no VAT applies. So, if you have a box on each table at a fund-raising dinner for donations, the money donated won't have any tax implications. However, the ticket revenue will.