Navigating VAT can be complex, but for charities, it often feels even more confusing. You might wonder: Do charities pay VAT on rent? Do charities pay VAT on services or electricity? What about advertising or building work? These are valid questions, and the answer isn’t always a simple yes or no. While charities in the UK do pay VAT in many situations, there are important reliefs and exemptions they can benefit from, especially when certain conditions are met.
This guide explains everything you need to know about VAT for charities in the UK, including when VAT applies, what goods and services are eligible for reduced or zero rates, and how to claim back VAT on eligible purchases.
Do Charities Pay VAT in the UK?
Yes, charities do pay VAT in the UK, but they may be eligible for several VAT reliefs depending on the type of goods or services purchased and how those purchases are used. Being a charity doesn’t automatically exempt you from VAT. Many charities mistakenly believe they are excluded from VAT, which can lead to financial issues and compliance problems.
A charity must register for VAT with HMRC if its taxable turnover exceeds £90,000 (2024–25 threshold). Even if your charity is under the threshold, you may choose to register voluntarily to reclaim VAT on purchases that relate to taxable business activities.
When Must Charities Register for VAT?
Charities must register for VAT if:
- Their taxable turnover exceeds £90,000 in a rolling 12-month period
- They supply goods or services that are not exempt or outside the scope of VAT
Even if your charity’s income is below the threshold, voluntary registration can allow you to reclaim input VAT on qualifying business purchases. This helps reduce costs and improve cash flow.
Do Charities Pay VAT on Electricity and Fuel?
Yes, charities pay VAT on electricity and fuel, but they may qualify for a reduced rate of 5% if the energy is used for:
- Residential accommodation (e.g., care homes, children’s homes)
- Charitable non-business activities (e.g., free daycare for disabled people)
- Small-scale energy use (e.g., under 1,000 kWh of electricity per month)
If less than 60% of the energy qualifies, charities pay 5% VAT on the qualifying part and 20% VAT on the remainder.
Do Charities Pay VAT on Rent?
Charities can avoid paying VAT on rent if the property is used for a relevant charitable purpose, and the landlord has opted to tax the building. In this case, the charity can issue a certificate to override the VAT charge.
However, if the property is used for business activities (e.g., fundraising events or trading), VAT may apply to rent.
Make sure to clarify your building use with both your landlord and accountant to ensure proper treatment.
Charity VAT query from real cases
A Reddit user in r/AskUK shared a common dilemma about whether charities must pay VAT when renting a property used for both charitable and admin purposes. This highlights how confusing VAT exemptions can be in real-life situations.
Are Charities Required to Pay VAT on Services and Purchases?
Yes, charities do pay VAT on many services and goods, but several important VAT reliefs are available—if the eligibility criteria are met. These reliefs can significantly reduce costs when properly claimed.
Key VAT Reliefs for UK Charities:
5% Reduced VAT Rate Applies To:
- Electricity and fuel used for non-business or residential charitable purposes
- Small-scale energy consumption (e.g., care homes, shelters)
0% Zero-Rated VAT Applies To:
- Public-focused advertising (TV, posters, online banners targeting the general public)
- Equipment for use by disabled individuals
- Lifeboats and rescue gear
- Medical and veterinary devices
- Drugs and chemicals used for medical research
- Talking books and newspapers
- Building work for accessibility (e.g., ramps, widened doors)
Important: Charities must provide valid documentation—such as an HMRC VAT relief certificate or signed eligibility declaration—to suppliers when requesting zero or reduced VAT rates.
Do Charities Get VAT Relief on Imports?
Yes, in some cases. If your charity imports essential items like medicine, food, clothes, or equipment for charitable use, you may be eligible for VAT relief on imports.
The goods must:
- Benefit people in need
- Be used in charitable activities or events
- Be supported by documentation proving eligibility
You can also treat certain exports of goods (as aid) as zero-rated, allowing you to reclaim associated VAT.
Can Charities Claim Back VAT?
Yes, charities can claim back VAT on goods and services used to make taxable business supplies. To do this, the charity must be VAT-registered, and:
- Have valid VAT invoices
- Maintain proper records
- Ensure purchases relate to taxable activities
VAT cannot be reclaimed on exempt or non-business activities.
How to Claim VAT Relief as a Charity
To access VAT relief, your charity must:
- Confirm it qualifies as a charity with HMRC or the Charity Commission
- Provide the supplier with a valid VAT relief declaration
- Submit any supporting evidence the supplier requires
Suppliers are responsible for charging the correct VAT rate, but can request documentation from you.
To claim VAT relief on qualifying goods and services, charities must complete an eligibility declaration. Download HMRC’s official form (PDF) to certify your status when requesting zero or reduced VAT rates from suppliers.
Can Charity VAT Claims Be Backdated?
Yes, if your charity was charged standard VAT on items that should have qualified for zero or reduced rates, you may claim a refund for up to 4 years. Simply adjust your VAT return or contact HMRC with proper documentation.
However, HMRC can also charge penalties if VAT was underpaid inappropriately. Always verify eligibility first.
Quick Checklist: VAT Reliefs Charities Can Claim
| Item/Service | VAT Rate | Condition |
|---|---|---|
| Electricity & Fuel | 5% | For non-business use/residential care |
| Advertising (public-focused) | 0% | Must be aimed at the general public |
| Medical/Veterinary Equipment | 0% | Used for charitable medical services |
| Rent (for charitable use) | 0% | Charity must override the landlord’s VAT election |
| Imports (charitable use) | 0% | Food, medicine, clothes, and relief goods |
| Building adaptations (e.g., ramps) | 0% | Must meet HMRC construction relief criteria |
Conclusion:
Do charities pay VAT in the UK? Yes—but how much they pay and what they can reclaim depends entirely on how the goods and services are used. From electricity and advertising to building work and imported goods, charities may qualify for substantial VAT reliefs if they understand and follow the right procedures.
Whether you’re asking Do charities pay VAT on services? Or can we claim VAT on purchases?, The key is knowing when relief applies, keeping accurate records, and communicating clearly with suppliers and HMRC.
By staying compliant and proactive, your charity can lower costs and free up more funds to do what really matters: making a difference.
Frequently Asked Questions
Yes, charities may need to pay VAT on fundraising events, depending on the setup. However, if the event is properly advertised, open to the public, and held occasionally, it may qualify for VAT exemption under HMRC rules.
Charitable donations are generally outside the scope of VAT, meaning no VAT is charged on them and they are not included in VAT returns. But if goods or services are received, VAT may apply to that portion.
Yes, if the building is used solely for charitable non-business purposes. A valid eligibility certificate must be given to the supplier.
Not-for-profit organisations need a VAT number only if their taxable turnover exceeds the current threshold (which is £90,000 for 2024–25).