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Steve Allen of VAT Advisers Ltd provides a VAT tip for charities.

Introduction

VAT is a perennial problem for charities, as it can often be a non-recoverable cost. As such, it pays to make sure that zero-rated VAT relief is obtained wherever possible, and one common example is the cost of advertising. In this article, we take a quick look at the conditions under which a charity can get these costs zero-rated.

First of all, zero-rated relief on advertising is available to ALL charities, regardless of whether they are VAT registered or not. This means that even if a charity is not VAT-registered, it may still be able to claim the relief and reduce its costs. If a charity is not registered with the Charities Commission, it should be able to demonstrate charitable status through its written constitution, but if need be, written approval can be sought from HMRC.

If VAT has been charged on past advertising, it’d be worth going back to the supplier to see if they will refund the VAT paid or issue a credit note (subject to the 4-year time limit).

What is the Scope of the Relief?

Provided the advertisement is in line with the charitable aims of the charity, it can be on any given subject, including the recruitment of new staff. Furthermore, the name or logo of the charity does not need to be included for relief to be allowed. Also, the relief does not override charity law or the need to comply with the British Codes of Advertising or any other relevant regulations.

Which Types of Media can be Used?

The zero-rated relief applies to any medium which communicates with the public. This includes all the conventional media such as television, cinema, billboards, on sides of vehicles, newspapers etc.

The relief can also apply where space is sold to a charity for advertising on other items, such as beer mats, calendars, or the reverse of till rolls. However, the sale of the items themselves will not be VAT-free, unless they qualify in their own right for zero-rating, such as books or children’s clothing.

The important factor to consider is whether or not the advertisement is placed on someone else’s time or space. If it is not, zero-rating cannot apply. As such, the relief won’t apply where a charity advertises through its own time or space, such as on its own website or through direct mail, and on its own goods, such as pens or adult clothing.

How is the Relief Claimed?

Where the relief is available, the charity can issue a declaration certificate to enable the supplier to zero-rate the supply. HMRC have a suggested format of the declaration, but charities can use their own versions provided all the key information is conveyed.