VAT exemptions and non-profits: The easy bitby
Most AccountingWEB readers will be familiar with the concept of VAT exemption, but what is less often appreciated is that several exemptions depend on the non-profit status of the supplier.
This article highlights three exempt Groups: welfare services, professional and membership subscriptions, and fundraising events.
Tucked away in Group 7 (Health and Welfare) is a short provision that exempts the supply of welfare services. Exemption applies where the supplier is a charity or a state-regulated private welfare institution or agency. Thus, exemption can be gained either by a charity or a suitably registered corporate body. The matter of state regulation was explored by the Court of Appeal in The Learning Centre (Romford) Ltd and LIFE Services Ltd.
Professional and membership subscriptions
The legislation provides that exemption applies to a non-profit making organisation. From a review of case law on Group 9, HMRC tends to challenge whether the organisation fits into one of the categories, such as professional associations, learned societies, etc. Do not assume that, just because an organisation charges a membership fee, that it will fall within the exemption.
The scope of eligible bodies for Group 12 is helpfully wide. It includes charities, as well as wholly-owned subsidiaries. Charities within Group 10 (ie sports charities) and non-profits within Group 9 (membership organisations) are also included.
The most important test to be met is that an event must have as its primary aim the raising of funds. Organisers must ensure promotional material, including that delivered online makes that primary aim clear.
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Hi, I am a VAT Consultant, part of the team at vatadvice.org We are based in Cambridgeshire. We work largely with charities but also advise a range of commercial organisations.
I have over 30 years experience in VAT, and am currently also a part-time member of the Tax Tribunals.