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This publication is available at https://www.gov.uk/government/publications/charity-fundraising-events-exemptions/fundraising-events-exemption-for-charities-and-other-qualifying-bodies
1.1 Who’s this helpsheet for?
This helpsheet is aimed at charities and qualifying bodies that raise money through fundraising events. It sets out the conditions for direct tax and the VAT exemption that apply to fundraising events held on or after 1 April 2000. VAT Notice 701/1: charities, including update 1 dated February 1997, sets out the law and guidance on the VAT exemption for fundraising events held before 1 April 2000.
This helpsheet applies to all fundraising events, including small scale events, directly conducted by charities and other qualifying bodies, and larger fundraising events conducted by the trading subsidiaries of charities.
1.2 Direct taxes
If the event held by a charity meets the criteria for VAT exemption, it will automatically qualify for the purposes of the HMRC Extra-Statutory Concession ESC C4 for exemption from Income Tax and Corporation Tax, as long as the profits are applied charitably. This concession only applies to events organised by charities and voluntary organisations.
1.3 ESC C4
Certain events arranged by voluntary organisations or charities for the purpose of raising funds for charity may fall within the definition of ‘trade’ in Section 832 ICTA 1988, with the result that any profits will be liable to Income Tax or Corporation Tax. Tax will not be charged on such profits provided:
- the event is of a kind which falls within the exemption from VAT under Group 12 of Schedule 9 to the VAT Act 1994
- the profits are transferred to charities or otherwise applied for charitable purposes
The fact that an activity is exempt from VAT and that any profit will not be taxed, doesn’t necessarily mean that charities can undertake the activity directly rather than through a trading company.
1.4 Should your charity register for VAT?
For VAT purposes, a charity’s activities could be entirely non-business, exempt business or taxable business, standard rate, reduced rate and zero rate, or any combination of these.
For VAT-registration purposes charities only need to take account of the income from their taxable business activities. When that exceeds certain limits charities must notify their local VAT Business Advice Centre. These limits and the procedure for registering for VAT can be found in VAT Notice 700/1: should I be registered for VAT? The registration limit is reviewed annually.
Charities can also apply to register voluntarily if they make taxable supplies below those limits.
Exempt supplies (business supplies which have no VAT charged on them at either the standard or zero rate, such as qualifying fundraising events) don’t form part of your taxable turnover. If you’re registered for VAT and make some exempt supplies, it may restrict the amount of VAT recoverable on overhead expenses. You can find further information in VAT Notice 706: partial exemption.
1.5 VAT law
The exemption for charitable fundraising is based upon Article 13A(1)(o) of the EC Sixth Directive on VAT which was first adopted by the UK in 1989. It’s designed to allow charities and other qualifying bodies, to exempt supplies of goods and services which they make as part of an event held to raise funds for their activities.
Not all fundraising events will qualify for exemption as this could give charities and other qualifying bodies an unfair advantage over commercial providers. The UK and EU member states may introduce any restrictions they consider necessary in order to prevent distortion of competition.
Charities also need to take account of charity law which limits the fundraising events they can hold. For more information read charities and fundraising (CC20).
The current UK law on the VAT exemption for fundraising events is set out in Group 12, Schedule 9 of the VAT Act 1994. The law changed significantly from 1 April 2000. The VAT 1994 in guidance book V1-2 ‘VAT law’.
2. Fundraising event exemptions
Bodies have charitable status when they’re:
- registered, excepted or exempted from registration with the Charity Commission in England and Wales
- registered by the Office of the Scottish Charity Regulator (OSCR) in Scotland
- invited to register by the The Charity Commission for Northern Ireland which are treated by HMRC as charitable
Not all non-profit making organisations are charities. The term ‘charity’ has no precise definition in any law. Its scope has been determined by case law. You therefore need to establish whether your organisation is a charity using the following guidelines:
- charities are non-profit distributing bodies established to advance education, advance religion, relieve poverty, sickness or infirmity or carry out certain other activities beneficial to the community
- in England and Wales charities must normally register with Charity Commission (not to be confused with VAT registration) - some very small charities don’t need to register with Charity Commission, there are also some other special cases where particular bodies don’t need to register, if you’re uncertain of your position see the Charity Commission website
- in Scotland all charities must be registered with the OSCR - HMRC decides whether bodies in Northern Ireland are eligible to claim the direct tax exemptions
There’s no distinction for VAT purposes between those charities registered with the Charity Commission or OSCR and those that are not. However, unregistered charities claiming VAT relief may need to demonstrate that they have ‘charitable status’. This may be evident from their written constitution or by the recognition of their charitable status by HMRC.
2.2 Bodies corporate connected with charities
Only a body corporate which is wholly owned by a charity and whose profits, from whatever source, are payable to a charity, will be eligible under this relief and may therefore qualify for VAT exemption on fundraising events. This means that a charity’s own trading company can hold fundraising events on behalf of the charity.
HMRC ESC doesn’t extend to the trading companies of charities as they can shed their profits using the Gift Aid Scheme.
2.3 Qualifying bodies
For the purposes of this relief ‘qualifying body’ means:
- any non-profit making organisation mentioned in item 1 of Group 9, Schedule 9 to the VAT Act 1994
- any body that is an eligible body for the purposes of Group 10, Schedule 9 to the VAT Act 1994, and whose principal purpose is the provision of facilities for persons to take part in sport or physical education
- any body that is an eligible body for the purposes of item 2 of Group 13, Schedule 9 to the VAT Act 1994
2.4 Voluntary organisations
The term ‘voluntary organisation’ can cover a wide range of groups and associations. Generally, they’re not-for-profit organisations with a public benefit purpose and are not for the private benefit of their members. A body within the definition of a qualifying body for VAT purposes will not necessarily be a voluntary organisation.
3. Fundraising events
3.1 Do all charity or qualifying body events qualify for exemption?
There are a few restrictions which are covered in the following paragraphs, to prevent distortion of competition with other organisations holding similar events which don’t have the benefit of VAT exemption.
3.2 What’s a fundraising event?
For tax purposes, it’s an event clearly organised and promoted primarily to raise money for the benefit of the charity or qualifying body. Social events which incidentally make a profit don’t fall within the exemption. People attending or participating in the event must be aware of its primary fundraising purpose.
An ‘event’ is an incident with an outcome or a result. This means that activities of a semiregular or continuous nature, such as the frequent operation of a shop or bar, cannot therefore be an event. The relief isn’t intended to exempt normal trading activities from VAT.
3.3 What kind of events are covered by the exemption?
The following are examples of different kinds of events which may be held for fundraising purposes:
- ball, dinner dance, disco or barn dance
- performance - concert, stage production and any other event which has a paying audience
- showing of a film
- fete, fair or festival
- horticultural show
- exhibition: art, history or science
- bazaar, jumble sale, car boot sale, or good-as-new sale
- sporting participation (including spectators): sponsored walk or swim
- sporting performance
- game of skill, contest or a quiz
- participation in an endurance event
- fireworks display
- dinner, lunch or barbecue
- an auction of bought in goods - an auction of donated goods is zero rated
3.4 Limits to the number of events held
Eligible events are restricted to 15 events of the same kind in your financial year at any one location by a charity (including its trading subsidiary) or qualifying body. The restriction prevents distortion of competition with other suppliers of similar events which do not benefit from tax exemption. If you hold 16 or more events of the same kind at the same location during your financial year none of the events will qualify for exemption.
3.5 What does ‘location’ mean?
Location means in the same place. Similar kinds of events held in different locations would qualify for exemption provided all other conditions were met. For example, 20 balls held by a national charity each in different towns in the same financial year would all qualify for relief.
Clearly, events which need to be held on special premises, such as a sports ground, swimming pool or theatre are easy to define. Each of these will be accepted as a different location.
If the event is held in a complex of cinemas, theatres or concert halls, the location is the specific cinema, theatre or concert hall in which the fundraising event takes place.
HMRC regards a charity’s entire website as a location for events held over the internet.
The rule is designed to be generous to charities which may hold a number of events of the same type in different locations, but in the same town. HMRC will not accept arrangements such as weekly boot sales each held in different, but adjacent fields, as constituting a separate location without considering whether such an arrangement is potentially distorting competition.
3.6 Events run over several days but at the same location
Where an event, such as a concert, is repeated on successive evenings each performance is a separate event and counts towards the maximum number of 15 allowed within the exemption. A single event which takes place at the same location for more than 1 day, such as a golf tournament, is accepted as 1 event.
Where a concert or similar event is offered as part of a travel package this may not be exempt.
The following don’t qualify for exemption:
- each event which counts towards 16 or more of the same kind held at the same location during your financial year
- events which aren’t organised and promoted for fundraising purposes, such as events which form part of a social calendar for members
- events which are organised and promoted primarily for another purpose, such as an annual general meeting
- asking the public for donations through street collections, flag days etc - the receipt of donations is not a business activity and so they are not subject to VAT
- the activity of selling goods is not an event and so is not eligible for relief under these provisions, even where all the proceeds are received by, or donated to, a charity; where the sale of goods takes place in the context of a qualifying fundraising event it is covered by the relief and zero rating may be available in certain circumstances
- travel packages which fall within the Tour Operator’s Margin Scheme
See the VAT treatment of income for a non-qualifying event below.
3.7 Is there an option to charge VAT on fundraising events?
VAT exemption is mandatory for any event that fulfils all the conditions. An event which doesn’t meet one or more of the conditions won’t qualify for exemption as a fundraising event.
3.8 More than 15 events of the same kind at a location: is VAT charged only from the 16th event?
No. Every event in a programme of 16 or more events will be taxable at the standard rate. The exemption applies up to 15 events of the same kind at a location. To exempt the first 15 events in a longer sequence risks distortion of competition. If you hold 16 or more events of the same kind at the same location during your financial year none of the events will qualify for exemption.
3.9 Frequent small scale events
The 15 event limit doesn’t apply to fundraising events where the gross takings from all similar events, such as coffee mornings, are no more than £1,000 per week. Such activities carried out more than once or twice a week are likely to be trading activities and not eligible for exemption, see what’s a fundraising event above.
3.10 Small scale events: take over £1,000 in a week
All the events in that week won’t qualify as small scale events and each will count towards the 15 event allowance.
3.11 Can the hire of a room or other costs be offset against the £1,000?
No. The £1,000 limit relates to the income of the events prior to any costs being deducted.
3.12 Can zero-rated supplies be made at an exempt event?
Yes, the sale of printed matter, such as programmes and commemorative brochures or any other goods which are eligible for the zero rate relief from VAT, may still be zero rated when supplied at a fundraising event.
This means that a VAT-registered charity or other qualifying body will be able to recover any input tax which is directly attributable to the taxable supply of those goods.
Examples of zero-rated items are:
- the sale of donated goods by a charity
- eligible food
- eligible printed matter
- young children’s clothing
- the supply of advertising time or space to a charity
- any other goods which qualify for zero rating
3.13 Why is there an anti-competition clause?
The restriction prevents distortion of competition with other suppliers of similar events which don’t benefit from tax exemption. HMRC will only use this measure where either:
- this relief is likely to distort the market
- there’s significant and systematic evidence of commercial distortion
If a commercial organisation alleged competitive disadvantage, HMRC would look carefully into the matter and any subsequent action would depend upon the particular circumstances. A charity would have the right of appeal against the decision.
3.14 Are fundraising holidays or day trips VAT exempt?
Any fundraising activity which falls within the Tour Operator’s Margin Scheme, such as a package of travel and accommodation, or which includes more than 2 nights accommodation doesn’t qualify for the fundraising exemption. Read further information about the scheme in VAT Notice 709/5: Tour Operators Margin Scheme.
3.15 Evidence to show the event was organised and promoted primarily to raise funds
There’s no single document that you must hold to demonstrate that the event was organised primarily to raise funds. Minutes of meetings, costing and similar documents should show that the main purpose for holding the event is to raise funds for charitable purposes or a qualifying body’s own benefit.
The event must be promoted in such a way that those attending the event are aware that its main purpose is to raise funds. Publicity material, tickets etc should therefore clearly refer to fundraising. For example
- fund-raising for
- in aid of
- help us to build
- help us to raise money for
Examples of publicity material, tickets etc, should be retained to support evidence of exemption.
3.16 Do charities need wholly-owned trading companies for fundraising activities?
Charity law governs which activities charities may carry out directly and which must be conducted through a trading company. For more information read charities and fundraising (CC20).
3.17 What fundraising activities can be carried out within a charity?
You need to bear in mind the following guidance from the Charity Commission on fundraising activities.
Your charity’s governing document may mean that the charity lacks the necessary powers to undertake a fundraising activity which is exempt from VAT and the profit of which will not be taxed. The new tax relief rules don’t change that situation. Charities in England and Wales seeking power to undertake a fundraising activity should approach the Charity Commission to see if their governing document can be amended.
If your charity has powers which appear to cover the proposed fundraising activity the charity trustees need to consider carefully whether they in fact do so. Any body which does have the power to engage in substantial trading activities, which involve significant risk to its property is unlikely to be a charity. A charity’s assets have been given for charitable purposes and shouldn’t be exposed to any serious or substantial risk of loss from fundraising activities. Risks which might be acceptable commercially will not necessarily be acceptable for your charity to undertake directly. Large scale events such as celebrity concerts or sporting events can be a valuable way of raising funds. However, experience shows that they also carry a high degree of risk and your charity trustees should not normally undertake such activities within your charity.
The Charity Commission strongly advises trustees to take professional advice before doing anything to expand a charity’s direct fund-raising activities in any way that falls outside the direct tax exemptions in place before 1 April 2000 and the revised ESC C4. The best way for your charity to raise funds and take full advantage of the new tax regime is to have a wholly owned trading subsidiary which pays all its profits to your charity under the Gift Aid scheme.
4. Scope of the relief
4.1 Are all the purchases for qualifying fundraising event VAT exempt?
No, normal VAT treatment will apply to the goods and services you purchase.
4.2 Does the exemption apply to individuals or independent groups that organise events as part of a national fundraising campaign?
Where an individual or an independent group holds events as part of a national fundraising campaign such as Comic Relief, Children in Need and Blue Peter Appeals, it’s unlikely that they’ll have charitable status or be a qualifying body. If the group doesn’t have charitable status or isn’t a qualifying body the exemption wouldn’t apply to such events and the group should see VAT Notice 700/1: should I be registered for VAT? Input tax incurred on expenditure can’t be reclaimed if the individual or independent group isn’t registered for VAT.
A branch of a charity may or may not be a separate charity to which the exemption applies. This will depend on how the branch and its parent are set up.
4.3 Will an event organised by 2 or more charities/qualifying bodies qualify for exemption?
Only if all the charities (including their trading subsidiaries) and qualifying bodies have organised, either individually or with others, less than 15 exempt events, of that kind, in that location, in their financial year.
4.4 Can a joint event organised by a charity and a qualifying body be exempt?
Only if the charity (including its trading subsidiaries) and the qualifying body, have organised, either individually or with others, less than 15 events in their financial year.
4.5 Are joint events organised by a charity/qualifying body and someone else be exempt fundraising event?
Only events organised exclusively by charities, their trading subsidiaries and qualifying bodies may be exempt fundraising events.
4.6 Events organised by professional fundraisers or agents?
Events held by a charity, trading subsidiary or qualifying body which are organised by professional fundraisers or other agents may qualify for exemption.
Generally, the VAT incurred by the charity or qualifying body in connection with an exempt event will not be recoverable. You may recover the VAT incurred in making taxable supplies within the event. This applies if the charity or qualifying body makes all the arrangements for the event.
If the agent charges or retains any part of the gross receipts, this is consideration for agency services and will be subject to VAT. This applies even if the amount is less than or equal to the cost of arranging the event.
4.7 What income is included in the exemption?
All the income for supplies of goods and services in connection with an event is exempt, for example:
- all admission charges
- the sale of commemorative brochures (may be zero rated)
- the sale of advertising space in those brochures (may be zero rated)
- other items sold by the charity such as t-shirts, non-donated auctioned goods etc - where items are normally supplied zero rated such as children’s t-shirts, then zero rating rather than exemption can be applied
- sponsorship payments directly connected with a qualifying event
4.8 Income not included in the exemption
Commemorative goods and souvenirs sold for a period after the qualifying fundraising event, eg:
- video and audio recordings of the fundraising event sold after the event has taken place will be standard rated
- surplus commemorative items such as adult t-shirts, mugs etc will be standard rated
- commemorative programmes will remain zero rated
- children’s t-shirts will remain zero rated
- donated goods for sale may still be sold VAT free provided the normal conditions are met
4.9 Is an income for a non-qualifying event subject to VAT?
When a fundraising event doesn’t qualify for exemption, it’s open to a charity or any other body to set a basic minimum charge which will be standard rated, and to invite those attending the event to supplement this with a voluntary donation.
The extra contributions will be outside the scope of VAT if all the following conditions are met:
- it’s clearly stated on all publicity material, including tickets, that anyone paying only the minimum charge will be admitted without further payment
- the extra payment doesn’t give any particular benefit (for example, admission to a better position in the stadium or auditorium)
- the extent of further contributions is ultimately left to ticket holders to decide, even if the organiser indicates a desired level of donations
- for film or theatre performances, concerts, sporting fixtures etc, the minimum charge is not less than the usual price of the particular seats at a normal commercial event of the same type
- for dances, and similar functions, the minimum total sum upon which the organisers are liable to account for VAT is not less than their total costs incurred in arranging the event
If the publicity material for a fundraising event suggests that those paying a recommended extra amount are more likely to be admitted than those paying merely the basic ticket price, then the extra amount becomes part of the consideration for a supply of services, rather than a donation, and as such is subject to VAT at the standard rate.
4.10 VAT for fundraising events before 1 April 2000
Read VAT Notice 700/1: should I be registered for VAT? for guidance.
5. Further help and advice
If you need further help and advice contact HMRC charities helpline
6.1 Check list: decide if an event qualifies for VAT exemption
- Are you:
- an organisation whose purposes are exclusively charitable
- a wholly owned subsidiary of a charity
- formally appointed agent of a charity
- a non-profit making body mentioned in item 1 of Group 9
- a trade union (or other staff association)
- professional association
- an association for the advancement of knowledge
- an association for making representations to government on business and professional interests of members
- a body which has objects which are in the public domain and are of a political, religious, patriotic, philosophical, philanthropic or civic nature
- a non-profit-making body mentioned in Group 10 of Schedule 9 of the Value Added Tax 1994 established for the principal purpose of providing facilities for participating in sport or physical education
- a non-profit making cultural body mentioned in item 2 of Group 13 of Schedule 9 of the Value Added Tax Act 1994 which is managed and administered on a voluntary basis by persons who have no financial interest in its activities
Is the event being held primarily for the purpose of raising funds and is this being made clear in the publicity for the event or on the tickets?
Are all the funds raised by the event for:
- your organisation’s own benefit and used in carrying out its objectives
- the benefit of your parent charity, if you are a wholly owned subsidiary
- the benefit of the charity which has appointed you as its agent
Is the event one of 15 or less of that kind being held at the location during your financial year?
Does the event fall within the Tour Operator’s Margin Scheme?
If the answer to any of the questions 1 to 4 is ‘no’, or the answer to question 5 is ‘yes’, the event does not qualify for exemption.
These notes are for guidance only and reflect the position at the time of writing.
They do not affect your right of appeal about your tax, National Insurance or VAT.