VAT exemption for fundraising events – when it doesn’t count

The VAT exemption for fundraising events is a valuable VAT relief for many charities. With a standard rate of VAT of 20%, qualifying for the exemption means the takings from an event can be one sixth (i.e. 20/120) more than they otherwise would be, although VAT cannot be recovered on the related costs.

On 27 June 2018 the First Tier Tribunal (FTT) released its decision that events organised by four Student Unions did not qualify for the exemption – Loughborough Students Union, Keele University Students Union, Nottingham Trent Students Union, The Students Union at Bournemouth University [2018] UKFTT 357 (TC).

The Student Unions are all charities and could therefore potentially have qualified for the VAT exemption. To quote an extract from the 25 July 2016 edition of HMRC VAT Manual VBNB60970 in the context of fundraising events, “The Union may qualify for this exemption if it is a charity.”

The main issue for the Student Unions was that, apart from information on the tickets and on promotional material indicating that the events were fundraising events, they were very similar to many other events the Student Unions organised, as part of their normal activities.

The Tribunal decision is a reminder that the exemption is not intended to apply to the normal business activities of charities. One of the conditions for qualifying for the exemption is that not more than 15 of events of the same kind and at the same location can be held in a financial year. Events at a location where the aggregate gross takings during a week do not exceed £1,000 can be ignored, when considering whether the 15 event limit has been exceeded. If the 15 event limit is exceeded then none of the events qualify for the VAT exemption for fundraising events.

In addition to the 15 event limit referred to above, the primary purpose of each event must be the raising of money and that must be reflected in how the events are promoted.

For further information or advice on VAT or our services for charities and not for profits, please contact the Garbutt + Elliott team.