Are Charities VAT Exempt?

Charities aren’t fully VAT exempt but can access VAT relief. Learn when VAT applies, what supplies are exempt, and how charities claim VAT relief.

Charities play a vital role in society and enjoy certain tax advantages. However, many people assume that charities are automatically exempt from VAT, which isn’t quite accurate. In the UK, charities are subject to the same VAT rules as other organisations – but they may be eligible for VAT reliefs, exemptions and zero rates, depending on the nature of their activities and supplies.

This guide breaks down how VAT works for charities, which supplies are exempt, when VAT registration is required, and how to claim VAT relief.

Are Charities VAT Exempt?

Charities are not fully VAT exempt. They must follow normal VAT rules and may need to register for VAT if their taxable turnover exceeds the VAT threshold (currently £90,000 per year).

However, charities may:

  • Make VAT-exempt supplies (e.g. education, health or fundraising events)

  • Qualify for zero-rated VAT on certain purchases and services

  • Be able to reclaim VAT on some business-related expenses if they’re VAT registered

Whether VAT applies depends on what the charity is selling or buying, not just their status as a registered charity.

What Is the VAT Registration Process for Charities?

Charities must register for VAT if their VAT-taxable turnover exceeds the threshold, just like any other business. This includes income from:

  • Selling goods or services

  • Hiring out property

  • Running a café or charity shop (if not all items are donated)

  • Selling advertising or sponsorship

You can register voluntarily even if you're under the threshold, which may allow you to reclaim VAT on costs.

To register:

  1. Apply online through HMRC’s website

  2. Provide your charity registration number, if applicable

  3. Set up a Government Gateway account to manage your returns

Once registered, you must charge VAT on taxable supplies, submit VAT returns, and maintain proper records.

What Supplies by Charities Are VAT Exempt?

Certain charity activities are VAT exempt, meaning no VAT is charged and no VAT can be reclaimed on related costs. Examples include:

  • Fundraising events for the charity’s own benefit

  • Education and vocational training

  • Welfare services

  • Membership subscriptions (if linked directly to charitable benefits)

  • Residential care for the disabled or elderly

Exemptions are strictly defined by HMRC and must meet detailed conditions. If a supply is exempt, it does not count toward the VAT threshold for registration.

Is There Any VAT Relief for Charities?

Yes. Charities are entitled to VAT reliefs on certain goods and services. These include:

  • Zero-rated advertising

  • Medical and scientific equipment for use in charitable care

  • Construction work on buildings used for charitable purposes

  • Goods for donation to people in need (e.g. clothing, food)

  • Fuel and power at a reduced VAT rate (5%)

To benefit from VAT relief, the charity must provide the supplier with an eligibility declaration. HMRC provides standard forms for this.

How Do You Claim VAT Relief as a Charity?

To claim VAT relief:

  1. Confirm the item or service qualifies for VAT relief under UK VAT law

  2. Provide a written declaration or eligibility certificate to your supplier

  3. Ensure the invoice reflects the correct VAT rate (0% or reduced rate)

  4. Keep detailed records in case of HMRC inspection

For example, when booking advertising space, a charity can provide a declaration to qualify for zero-rated VAT, so the supplier removes VAT from the bill.

Can Charities Reclaim VAT?

Charities that are VAT registered can reclaim VAT on purchases used in connection with their VAT-taxable business activities, such as:

  • Running a shop selling new goods

  • Charging for services

  • Renting out property

Charities cannot reclaim VAT on purchases linked to VAT-exempt or non-business activities, such as grant-funded work or free services to the public.

Final Thoughts

Charities are not automatically VAT exempt, but they are entitled to various reliefs, exemptions, and zero-rated supplies that can reduce their VAT burden. Whether or not VAT applies depends on the type of supply being made or received.

To stay compliant and tax-efficient, charities should keep accurate records, assess whether registration is required, and claim reliefs where eligible. VAT for charities can be complex, so professional advice is recommended for larger organisations or those involved in trading activities.