Is there any VAT on goods given in exchange for a donation to a charity.

Is there any VAT on goods given in exchange for...

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I have a client who proposes to give away a promotional gift to prospective customers.  The gift is free to the customer but the customer is then invited to make a donation to a registered charity (the client's chosen charity).  Will the gift and the donation be linked to form a taxable supply for VAT purposes, or will the gift and the separate donation be outside the scope of VAT?

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chips_at_mattersey
By Les Howard
14th Aug 2014 13:37

It depends!

If the promotional gift is entirely that, and the recipient is entitled NOT to give a financial donation, then the gift is outside the scope of VAT, subject to the £50 limit. Similarly, the financial donation will be exactly that.

If, however, the terms of the promotional gift are such that the financial gift is obligatory, then it is a taxable supply.

Thanks (2)
By Steve Kesby
14th Aug 2014 13:40

Probably not

If the customer isn't under any obligation it isn't consideration for any actual supply.

There may be a deemed supply though, if the cost of the gifts exceeds £50 per customer in any twelve month period.

EDIT: Beaten by the fast-fingered Les!

Thanks (1)
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By buttinski
14th Aug 2014 13:53

Thanks both

but is there anything you can point me to in the VAT regs, as the client says that HMRC has told him there is VAT on the donation as a consequence of the gift (value approx. £10.00).

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chips_at_mattersey
By Les Howard
14th Aug 2014 14:02

Gift

Presumably HMRC mean that £50 x 20% = £10, output tax due on gift of value of £50.

Business gift legislation is in VAT Act 1994, Sch 4, para 2.

On the issue of whether the arrangement is a genuine gift, or payment for goods, then you should check HMRC online guidance at VATSC03000.

EDIT: (Just beaten Steve by a short head!)

Thanks (2)
By Steve Kesby
14th Aug 2014 14:02

The problem...

... in pointing you to something in the VAT regs, is that there's nowhere where it categorically doesn't say what Les and I have said. It's not said throughout the law.

The best I can do is VATSC30500. See the meaning of in return for the supply.

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By buttinski
14th Aug 2014 14:21

Thanks again

for such prompt and complementary replies.

 

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