VAT exemptions and the cost of charity fundraising events

15 August 2008

Most charities are aware that they can organise up to 15 fundraising events of the same type in the same place each year and the income received therefrom will be exempt from VAT.

The downside, of course, is that any VAT incurred on the costs of such events such as venue hire, T-shirts and mugs to be sold at the event, cannot be reclaimed.

For sometime, it has been unclear from the public notices on the subject (700/1 ‘Charities’ and CWL4 ‘Fund-raising events: Exemption for charities and other qualifying bodies’) to what extent the exemption applies to various aspects of large-scale charity challenge events such as walking the Great Wall of China or cycling across the Sahara.

However, that issue has now been addressed by HMRC in collaboration with the charity sector. Para 3.15 of Notice CWL4 and para 5.9.4 of Notice 700/1 have been revised and a new section 10 added to Notice 700/1 clarifying the following:

Fundraising events that include a package of both travel and accommodation, or bought in accommodation, or more than two nights’ accommodation from the charity’s own resources, do not fall within the exemption.

If the event is non-qualifying and the charity is acting as a disclosed agent, it must apply the rules explained in Notice 709/6 ‘Travel agents and tour operators’.

If the event is non-qualifying and the charity is acting as principal or as undisclosed agent, it must apply the rules explained in Notice 709/5 ‘Tour Operators’ Margin Scheme’.

Each scenario is accompanied by worked examples, and a flowchart at the end of section 10 provides further assistance to help charities apply the correct VAT treatment to a complicated area. The new guidance is effective from 31 July 2008 but charities which have contracts in place on that date may continue to apply the old procedures.