1st January 2019

Charities VAT Refund Scheme

Understand these important changes

HMRC has updated VAT Notice 1001 on the VAT Refund Scheme for qualifying charities.

VAT Notice 1001 explains which charities are eligible for a refund of VAT incurred on goods and services used for their non-business activities; what to do when circumstances change; what falls within the scope of the refund scheme; and how to make a claim.

The notice only applies to charities defined as qualifying as defined under section 33C and 33D of the VAT Act 1994. There are 4 categories of qualifying charities and they are:

  • palliative care
  • air ambulance
  • search and rescue
  • medical courier

Ordinarily, it's not possible to recover the VAT incurred on goods and services purchased to support non-business activities. However, in certain circumstances, there are schemes to reimburse this otherwise irrecoverable VAT. For this to be the case, the provisions of sections 33C and 33D of the VAT Act 1994 must apply.

Qualifying charities can claim a refund of VAT, whether or not VAT registered, for costs they incur on most goods and services supplied to them on or after 1 April 2015 and which relate to their non-business activities.

This extends to UK VAT incurred on:

  • the supply to them of goods or services
  • goods imported from a country outside the EC or acquired from another member state of the EC

Refunds claims should be made in Box 4 of the VAT Return. In that include not only the input tax incurred in making the taxable business supplies, but also the amount of VAT being reclaimed under sections 33C and 33D. Be sure to include the net value of purchases in Box 7.

A charity that has been granted an exemption must register for VAT to claim a refund of VAT. For those non-VAT registered a claim may be made using form VAT126.

HMRC make refunds by BACS or payable order, and give a unique number to quote on all claims – but this doesn't mean that HMRC has registered you for VAT.

If in any doubt please seek advise from your professional adviser.



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