Key facts
- Charities are not automatically exempt from VAT.
- Some goods and services supplied to charities qualify for zero or reduced rates.
- Charitable trading may be taxable, exempt, or non-business — each has different VAT implications.
- Irrecoverable VAT is a significant cost for many charities.
Why Charities Still Pay VAT on Most Purchases
A common misconception: being a charity does not make you exempt from VAT. If your taxable turnover exceeds £90,000, you must register like any other business.[1]
VAT Reliefs for Charities
Charities can benefit from:[2]
- Zero-rated advertising (charity-funded ads in print, TV, radio)
- Zero-rated goods for disabled people (funded by charities)
- Reduced-rate fuel and power for non-business use
- Exempt fund-raising events (up to 15 per year per type)[3]
The Partial Exemption Problem
Many charities make a mix of taxable, exempt, and non-business activities. This means they can only reclaim a proportion of their input VAT. Irrecoverable VAT can be a significant hidden cost.
Frequently Asked Questions
Are charities exempt from VAT?
No. Charities are not automatically exempt from VAT. If a charity’s taxable turnover exceeds £90,000, it must register for VAT like any other organisation.
What VAT reliefs are available for charities?
Charities can benefit from zero-rated advertising, zero-rated goods for disabled people, reduced-rate fuel and power for non-business use, and an exemption for up to 15 fund-raising events per year per type.
What is irrecoverable VAT for charities?
Because charities often make a mix of taxable, exempt, and non-business activities, they can only reclaim a proportion of their input VAT. The VAT they cannot reclaim is called irrecoverable VAT and is a significant hidden cost.
Are charity fund-raising events exempt from VAT?
Yes, qualifying fund-raising events run by charities are VAT-exempt, up to a maximum of 15 events of the same type per year at any one location.
Further Reading
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Sources
- VAT for charities — GOV.UK
- Reliefs from VAT for charities (VAT Notice 701/1) — GOV.UK
- Fund-raising events exemption — GOV.UK