Find out if you can get a refund on goods and services under a VAT Refund Scheme if you’re a charity.
This notice cancels and replaces Notice 1001 (April 2015).
1.1 Information in this notice
This notice explains the VAT rules that apply to charities eligible for refunds of VAT under sections 33C and 33D of the VAT Act 1994.
It only applies to those charities which are defined as a qualifying charity in section 33D of the VAT Act 1994.
- palliative care charities
- air ambulance charities
- search and rescue charities
- medical courier charities
It also explains which charities are eligible to use the Refund Scheme to claim a refund of VAT incurred on goods and services used for their non-business activities. For example, what to do when circumstances change, what falls within the scope of the Refund Scheme and how to make a claim.
This notice assumes a working knowledge of basic VAT principles, as outlined in the VAT guide (VAT Notice 700).
How VAT affects charities (VAT Notice 701/1) has general guidance on VAT and charities, including details of certain reliefs.
1.2 Who should read this notice
Palliative care charities, air ambulance charities, search and rescue charities and medical courier charities. For definitions of these charities see paragraph 1.7.
1.3 The law
The legislation covering VAT refunds to qualifying charities can be found in the VAT Act 1994 sections 33C and 33D.
1.4 The definition of a charity
A charity is defined for tax purposes in Schedule 6 to the Finance Act 2010.
In summary this means that a charity must be:
- based in the UK, EU, Iceland, Liechtenstein or Norway
- established for charitable purposes only
- registered with the Charity Commission for England and Wales or another regulator, if this applies to you
- run by ‘fit and proper persons’
1.5 Evidence you’ll need to show that you’re a charity for tax purposes
You’ll need to be recognised as a charity for tax purposes by HMRC if you’re either not already recognised in this way by HMRC or if you’re not registered as a charity with the Charity Commission for England and Wales in order to claim a VAT refund.
1.6 Charities that provide free goods or services to the public and other organisations
If charities provide services free of charge to members of the public and other organisations they’re not regarded as carrying out business activities for VAT purposes.
Supplies of goods free of charge can be business activities for VAT purposes in certain circumstances.
Such charities may, of course, have other activities that in their own right are business activities, for example, provision of training for a charge and sales of books and gifts.
Ordinarily, it’s not possible to recover the VAT incurred on goods and services purchased to support non-business activities. In certain circumstances, however, there are schemes to reimburse this otherwise irrecoverable VAT. For this to be the case, the provisions of sections 33C and 33D of the VAT Act 1994 must apply.
1.7 Charities that are included in sections 33C and 33D
It’s not possible to provide an exhaustive list of the charities which are likely to benefit from the VAT Refund Scheme, but the following details should help you decide if you’re eligible.
There are 4 categories of qualifying charities in sections 33C and 33D.
1. Palliative care charities
These are charities whose main purpose is the provision of palliative care under supervision of a medical professional to persons who are in need of such care because they have a terminal illness. Terminal illness means a progressive disease which will result in a person’s death. This will mainly cover adult and children’s hospices.
Unlike with search and rescue charities and medical courier charities, this category does not include charities whose main purpose is to support palliative care charities (for example, fundraising charities), neither does it include charities whose main purpose is to provide trained nurses to palliative care charities.
2. Air ambulance charities
These are charities whose main purpose is to provide emergency medical air ambulance services. Their services must be arranged or asked for by a NHS body that delivers a NHS ambulance service. In England this is a NHS Trust, in Wales a NHS Foundation Trust, in Scotland a special Health Board and in Northern Ireland a Health and Social Care trust.
Unlike with search and rescue charities and medical courier charities, this category does not include charities whose main purpose is to support air ambulance charities.
3. Search and rescue charities
There are 2 types of search and rescue charities.
The first type of search and rescue charities is those whose main purpose is to carry out co-ordinated search and rescue of persons who are, or may be, at risk of death or serious injury. Such charities include sea or shoreline rescue teams, mountain rescue teams, cave rescue teams, lowland search and rescue teams and rescue dog teams. The bodies co-ordinating search and rescue of persons are listed in section 33D of the VAT Act 1994.
The second type of search and rescue charities is those whose main purpose is to support, develop and promote the first type of search and rescue charities.
4. Medical courier charities
There are 2 types of medical courier charities.
The first type of medical courier charities is those whose main purpose is to provide services for the urgent transportation of items of a medical nature. For example blood, platelets, samples for analysis, drugs, patient notes, small medical instruments, donor breast milk and other medical supplies.
The second type of medical courier charities is those whose main purpose is to support, develop and promote the first type of medical courier charities. This will mainly cover ‘blood bike’ charities.
Qualifying charities can claim a refund of VAT incurred on most goods and services supplied to them on or after 1 April 2015 and which relate to their non-business activities.
1.8 The meaning of ‘charities whose main purpose is to support, develop and promote other search and rescue or medical courier charities’
You’re a charity whose main purpose is to support, develop and promote other search and rescue charities or medical courier charities if you undertake one or more of the following:
- co-ordinate and provide support to such charities
- support and help to establish such charities
- promote good practice for charitable search and rescue or medical courier activities, examples may include training, knowledge and information sharing
- arrange supplies of goods and services to such charities which are required for charitable search and rescue or medical courier activities
- represent such charities regionally or nationally
1.9 Charities not included in sections 33C and 33D
In general charities not included in sections 33C and 33D cannot recover VAT they incur on their non-business activities. This Refund Scheme applies only to the 4 categories of qualifying charities. However, there are certain VAT reliefs for charities.
1.10 Charities covered by sections 33C and 33D and VAT groups
If charities covered by sections 33C and 33D and their trading subsidiaries are VAT-registered they can form a VAT group if they meet the requirements for VAT group treatment as set out in VAT Notice 700/2: group and divisional registration. HMRC will grant such requests only if they’re satisfied that you’re not seeking the arrangement for tax avoidance purposes.
If you’re a VAT group which includes a qualifying charity, only the qualifying charity is eligible to claim a refund of VAT incurred on its non-business activities. The entitlement to refunds of VAT incurred on non-business activities does not extend to any residual rate for the VAT group as a whole.
2. VAT you can reclaim under sections 33C and 33D
2.1 Scope of this section
This section explains what VAT you can reclaim under the scheme, if you’re a qualifying charity. You can claim a refund of VAT incurred on most goods and services supplied to you on or after 1 April 2015 and which relate to your non-business activities.
This extends to UK VAT incurred on:
- the supply to you of goods or services
- goods imported from a country outside the EC or acquired from another EC member state
Imports (VAT Notice 702), Notice 3001: customs special procedures for the Union Customs Code and The single market (VAT Notice 725) has more details about when you’ll incur VAT on goods imported from a country outside the EC or acquired from another EC member state.
It does not extend to supplies made to you before 1 April 2015.
2.2 Who the supply of goods and services must be made to
Whether or not you’re registered for VAT, you can get refunds on goods and services you use or intend to use for your non-business activities only if you:
- place the order
- receive the supply
- receive a tax invoice addressed to you
- pay from your own funds (including funds awarded to you, for example, lottery funds)
‘Non-business activities’ does not mean purchases made for private purposes.
2.3 How far back you can claim VAT
2.4 How to decide if you’re eligible to claim a refund of VAT incurred on your ‘non-business activities’
You’re eligible to claim refunds of VAT where your main purpose is to carry out one of the following:
- co-ordinated search and rescue of persons
- co-ordinated emergency medical air ambulance activities
- palliative care activities
- medical courier activities
These will be services that you provide for no consideration, normally because they’ve been funded through grant-in-aid or voluntary donations. This means that you’ll be able to claim a refund of the VAT incurred on the purchases you make to support these, and any other activities that are not carried on by way of business.
2.4.1 The meaning of ‘main purpose’
Main purpose means the primary function of the charity. Governing documents such as a charity’s memorandum and articles of association, constitution, trust deed or declaration of trust and its annual report should refer to the main purpose of the charity.
The legislation requires that the ‘main purpose’ is, as applicable, to do the things described in paragraph 1.7. In each case we expect that this activity will be the current core activity of the charity, to which other activities are subordinate.
For example, we expect that the core activity of an air ambulance charity is to provide emergency medical air ambulance services. We would expect this to be clearly articulated in governing documents such as the charity’s memorandum and articles of association, constitution, trust deed or declaration of trust, and in its annual report.
Once the main purpose has been established, it will be clear whether you’re one of the charities described in paragraph 1.7. If you are, you will need to determine which of your activities are not carried on by way of business, and which activities are carried on by way of business.
VAT can only be reclaimed under the Refund Scheme described in this notice in relation to purchases made to support non-business activities.
The VAT treatment of your income streams (that is, whether they’re not consideration for any supplies, or whether they’re consideration for taxable or exempt supplies) follows the normal VAT rules. (See paragraphs 2.4.2 to 2.4.7.)
2.4.2 Clarify your business activities
Clarify your business activities if you’re a hospice charity and receive funding from the NHS, Clinical Commissioning Group or local authority to support your provision of palliative care.
Provided there’s no direct link between the funding you receive and the palliative care you provide to patients, the funding is not consideration for any supplies by you of that care and it is therefore a non-business activity. For example, this includes the funding you receive under the standard NHS service level contract in England or a service level agreement in Scotland, Wales or Northern Ireland).
However, if you enter into arrangements to care for referred or named individuals (in addition to requirements covering general outcomes), your activities under those arrangements may be a business activity.
If you provide welfare services at significantly below cost to individuals you may be able to treat this as non-business income for VAT purposes. For more information see How VAT affects charities (VAT Notice 701/1).
2.4.3 Supplies exempt from VAT are not the same as non-business activities
Some supplies are exempt from VAT, which means that they’re business activities for VAT purposes, but no tax is payable. Generally you’re not able to recover VAT on costs you incur on exempt supplies, see paragraph 2.9.
2.4.4 Zero-rated supplies are not the same as non-business activities
Some supplies are zero-rated for VAT, which means VAT is not payable on them. However, if you’re VAT-registered you can normally recover the VAT on expenses you incur on zero-rated supplies you make, subject to some restrictions.
2.4.5 Recovering VAT on overhead costs on a mixture of business and non-business activities
If you’re a qualifying charity and you carry out both business and non-business activities you’ll need to apportion any VAT you incur on overhead costs relating to both types of activity.
There are a number of methods a charity can use to apportion this VAT. Some methods are detailed in the VAT guide (VAT Notice 700). To claim a refund of VAT on the non-business proportion of overhead costs you’ll need to have a method in place.
If you’re registered for VAT you can claim a refund of VAT incurred on your non-business activities and your taxable business activities on your VAT Return (see section 3). If you make exempt supplies for VAT purposes see paragraph 2.9.
2.4.6 Recharging costs to other charities or organisations
See How VAT affects charities (VAT Notice 701/1) for more information on when recharging costs to other charities or organisations may be a business activity.
2.4.7 Business and non-business activities and charities
See How VAT affects charities (VAT Notice 701/1) for more information about business and non-business activities and charities.
2.5 Specific examples of costs incurred on non-business activities
More specifically and where applicable, and provided the costs do not relate to any business activities, this might include the UK VAT you incur on:
- the purchase or lease of certain vehicles
- vehicle maintenance and storage
- the purchase of road fuel
- the purchase of drugs and medicines
- the purchase and maintenance of equipment
- uniforms, protective clothing and identity badges
- building costs including utilities, repairs and maintenance
- stationery and IT costs
However, see paragraph 2.8 which covers VAT where a refund cannot be claimed.
Fundraising by a charity may or may not be a business activity. The fundraising could be outside the scope of VAT (if donations are given), exempt from VAT (qualifying fundraising events) or standard-rated (for example, sponsorship or charity balls).
VAT incurred on fundraising costs can be attributable to non-business activities (for example, campaigns resulting in donations), or to exempt or taxable supplies. It’s only the VAT incurred on non-business fundraising that’s eligible for recovery under section 33C.
To determine the correct treatment for VAT you need to consider the specific circumstances for each fund raising activity you undertake. HMRC guidance Fundraising events: exemption for charities and other qualifying bodies gives more information on how to determine whether your event qualifies for exemption.
2.7 Charging for some of your activities and whether you’ll be disqualified from using sections 33C and 33D
Provided your main purpose is one set out in paragraph 2.4 it does not matter if you occasionally charge people for some of your activities. However, your claim under sections 33C and 33D is restricted to VAT incurred on your non-business activities as explained in paragraphs 2.2 to 2.4.
If you incur VAT on purchases made for your business activities for VAT purposes this VAT is input tax and is subject to the normal rules of input tax deduction, see the VAT guide (VAT Notice 700).
If you have exempt business activities see paragraph 2.9.
2.8 VAT that cannot be claimed under sections 33C and 33D
The provisions in sections 33C and 33D cannot be used to reclaim any VAT you incur on any business activities such as:
- shops, catering outlets, commercial sponsorship (including commercially sponsored websites)
- educational courses that you provide for consideration
Additionally, sections 33C and 33D do not permit you to recover any VAT:
- which cannot be recovered under the normal VAT rules, for example VAT incurred on business entertainment and, in certain circumstances, when you purchase or lease a car
- incurred in another member state (for example, TVA (Taxe à la Valeur Ajoutée) incurred in France), in certain circumstances you can reclaim this VAT from the authorities in the member state where you incurred the VAT, see Claim back VAT paid in the EU if you’re established elsewhere (VAT Notice 723A).
2.9 Other VAT you’re entitled to recover
The provisions in sections 33C and 33D cannot be used to recover VAT incurred in any circumstances other than those outlined in paragraphs 2.2 to 2.6.
However, if you’re registered for VAT you can recover the VAT incurred on the supply to you of most goods and services, and the importation or acquisition by you of most goods that relate to your taxable business activities. See the VAT guide (VAT Notice 700).
You cannot generally recover VAT incurred on supplies you make that are exempt from VAT, and you’ll need to operate a partial exemption method to determine whether, and how much, input tax will be restricted. The VAT guide and Partial exemption (VAT Notice 706) has more information.
If you’re not registered for VAT, you can only reclaim VAT to the extent permitted under sections 33C and 33D.
3. Recover the VAT you’ve incurred on your non-business activities if you’re VAT-registered
3.1 Scope of this section
If you’re a qualifying charity under sections 33C and 33D of the VAT Act 1994 and you’re registered for VAT, this section explains how you can recover the VAT you’ve incurred in carrying out your non-business activities.
3.2 Claim the VAT refunds you’re entitled to if you’re VAT-registered
You should claim your refund in box 4 of the VAT Return. In that box you should include the input tax you incurred in making your taxable business supplies and the amount of VAT you’re reclaiming under sections 33C and 33D. Be sure to include the net value of your purchases in box 7.
3.3 VAT you’re entitled to claim but have not included on your VAT Return
You can still claim this VAT but must do so within 4 years of the due date when the VAT became chargeable. In most cases this will be the date on your supplier’s invoice. However, note that the Refund Scheme only applies to VAT incurred on supplies made to you on or after 1 April 2015. It does not extend to supplies made to you before that date.
3.3.1 How to make a claim for a VAT refund you’ve not included on your VAT Return
- make the claim in writing
- state the amount you’re claiming
- state the periods covered
- explain the basis of your calculation
- hold evidence to support your claim
3.4 VAT registration and charities
How VAT affects charities (VAT Notice 701/1) has more information about registering for VAT if you’re a charity.
4. What to do if you’re a qualifying charity that’s been granted an exemption from VAT registration
4.1 Scope of this section
If you’re a qualifying charity under sections 33C and 33D of the VAT Act 1994 and you’ve previously asked for, and been granted exemption from VAT registration because you only make wholly or mainly zero-rated supplies and you now wish to claim VAT on non-business activities under section 33C, you must now register for VAT. This section explains what you need to do.
4.2 Change your circumstances from exemption from registration to being registered
To change your status from being exempted from VAT registration to VAT-registered you need to write to us and withdraw your request for exemption and make a request to be registered.
4.3 Date of VAT registration
Your date of VAT registration will be the date of the request. Claims under section 33C can only be made from that date.
4.4 Make a claim once you’re registered
You should claim your refund in box 4 of your VAT Return - section 3 of this notice.
5. Qualifying charities which are not registered for VAT
5.1 Scope of this section
If you’re not registered for VAT and you do not need to register, you’ll still be able to claim a refund of the VAT you’ve incurred on the goods and services you’ve bought for your non-business activities if you’re a qualifying charity under sections 33C and 33D of the VAT Act 1994 (see paragraph 1.7). This section will help you make sure your claims for VAT refunds are valid. It also explains how to make them.
5.2 You’re in sections 33C and 33D but not registered for VAT
Follow the steps to find out if you can recover VAT on your goods or services.
|1||Read section 2 of this notice to find out the main principles|
|2||Read section 3 of this notice to see whether you can meet the various requirements set out there|
|3||Reclaim the VAT you’ve incurred only when you can attribute it to your non-business activities|
|4||Remember that, because you’re not registered, you may neither charge VAT on your taxable business activities nor recover the VAT relating to them|
5.3 Claim VAT refunds you’re entitled to
Follow the steps to find out how to claim VAT refunds.
|1||Complete form VAT126 then send it to the address in paragraph 5.4|
|2||Make sure that your claim relates to a period of at least one calendar month - or at least 12 months if it’s for less than £100|
|3||Make sure the period you choose ends on the last day of a calendar month|
|4||Make sure you make your claim within 4 years after the end of the month in which you received the supply, acquisition or importation, for example, you receive a supply of goods in July 2015, so you must submit your claim by 31 July 2019|
|5||Keep the invoices and other records to support your claims for 6 years, unless you’ve applied in writing, and HMRC has agreed to you keeping them for a shorter period|
|6||If you get refunds by Bacs, tell HMRC about any changes to the details of your bank account|
5.4 Where to send your claim
Send your claim to:
HM Revenue and Customs
Miscellaneous Charges Unit
5.5 Once HMRC receives your claim
When we receive your claim, we’ll normally:
- make your refund by Bacs or payable order
- give you a unique number to quote on all claims, but this does not mean that we’ve registered you for VAT
From time to time HMRC will select claims for verification.
6. More help and advice
If you still need more help and advice write to:
HM Revenue and Customs
Charities Correspondence S0708
PO Box 205
For general VAT enquiries contact the VAT helpline.
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