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As a business supplier, you can sell certain goods and services to charities at the zero rate or reduced rate of VAT (5 per cent). You may also be able to supply certain other goods and services to certain other eligible bodies at the zero rate of VAT when they are purchased with charitable funds.
However, before you can do so, your customer must provide you with evidence of their eligibility and other information to show that the sale meets certain conditions - so that it qualifies for the relief. This is known as an eligibility declaration or certificate.
It’s your responsibility to take reasonable steps to check the information provided and be satisfied that the customer you’re supplying is entitled to VAT relief. It’s also your responsibility to apply the right VAT rate.
Note that Community Amateur Sports Clubs (CASCs) don’t qualify for the VAT reliefs for charities.
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If a charity supplies you with a satisfactory eligibility declaration (see the section ‘Checking that your customer is eligible for VAT relief’) they can buy certain goods and services without paying VAT.
The goods and services that may qualify for zero rating include:
Charities can get a reduced rate of VAT on fuel and power supplied to them for non-business use, as well as certain related services such as maintenance and repairs.
If the charity has a mix of business and non-business activities, they must provide you with a certificate that declares what percentage of the fuel and power supplied is put to non-business use.
The certificate must show:
If 60 per cent or more of the fuel or power is for non-business activities, they will qualify for reduced rate VAT on the whole supply. If less than 60 per cent of the fuel or power is for non-business use, you should charge reduced rate VAT on the portion which is for non-business use, and standard rate VAT on the portion which is for business use. The charity must notify you if their use changes so that you can adjust the VAT charged if necessary.
The installation of certain energy-saving materials, such as central heating controls and insulation in residential accommodation or in a building used solely for a relevant charitable purpose can be supplied at the reduced rate of VAT.
Certain goods and services can be zero-rated when purchased by certain types of charities and other eligible bodies with charitable or donated funds, or purchased by others specifically for donation to eligible bodies.
The following are eligible bodies for this VAT relief:
The supplies that can qualify for relief include:
It’s your responsibility to ensure that you apply the correct VAT rate to your supplies. You must therefore be satisfied that your customer is entitled to the relief and also that the goods or services being supplied qualify for the relief.
You should ask your customer for both of the following:
In order to take advantage of the VAT reliefs and exemptions for charities, a charity must hold evidence that it is registered with the Charity Commission for England and Wales. If it is not registered with them - for example, if it is exempt from registration with the Charity Commission or is a Scottish or Northern Ireland charity - then it must have evidence that it has been formally recognised as a charity by HMRC for tax purposes.
Your charity customer must therefore be able to provide you with either:
Customers requesting zero-rating on charity funded medical, veterinary, scientific or rescue equipment must satisfy you that they are an eligible body described in section 3 of VAT Notice 701/6 or that they are purchasing the goods for donation to a body described in that section.
For the buildings and construction reliefs there is a legal requirement for your customer to provide you with a certificate. These certificates are contained in section 18 of VAT Notice 708. For the other charity reliefs there is no set format but HMRC recommends that you get a written eligibility declaration, also known as a certificate, from your customer confirming that the conditions for the particular relief are met. Sample certificates for your use are contained in the supplement to VAT Notice 701/6.
A declaration should:
It’s important that you carefully check the declarations you receive and take reasonable steps to satisfy yourself that the conditions of the relief are met. You must keep the completed declarations, and any additional checks carried out, with your records.
You - the supplier - are responsible for ensuring that all the conditions for zero or reduced rates of VAT are met.
The production of a declaration or any other evidence of eligibility by your customer does not automatically authorise the zero rating or reduced rating of a supply. You must take reasonable steps to confirm that any information given by the customer is correct and check any apparent inconsistencies.
However, your customer has a responsibility to make a truthful statement of their eligibility for VAT relief and, where required, must provide appropriate documentation to support any statements they provide.
HMRC will not seek to recover tax due from a supplier who has taken reasonable steps to check the validity of a declaration, but has failed to identify an inaccuracy, and, in good faith, has zero-rated or reduced-rated a supply.
For more help you can contact HMRC Charities by phone, email, or post.