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HMRC internal manual

VAT Charities

What is a charity?: The status of commonly found organisations

The following paragraphs outline the status of some common organisations.

Sports clubs

Sports clubs are not usually charities. This is because the promotion of sport is not a charitable object in itself and such clubs usually exist to provide facilities for their members.

However, it may be possible for some sports clubs to be charities. If the organisation has objects which are:

  • for the public good
  • in the interests of social welfare
  • the club exists for people who are in some way in need by reason of youth, old age, infirmity, disability, poverty or social circumstances.

Under these conditions an organisation which exists to promote, for example, swimming to assist the rehabilitation of injured people might qualify as a charity. Or the provision of sporting facilities might be ancillary to wider charitable objectives. Also, certain umbrella bodies which exist to promote a sport and physical welfare in general might have charitable status as being for the benefit of the community.

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Affiliation to a national charity

A local organisation may be affiliated to a national organisation which is a clearly recognised charity. It may be that all affiliated organisations are governed by the same written constitution and share the same aims as the national charity. Only where this is the case can you accept that the local organisation is also a charity.

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Philanthropic organisations

There are a number of organisations which exist to do good work but are not charities. Many such organisations choose not be charities. Charitable status brings with it many restrictions on the use to which funds can be put. Some organisations prefer to retain freedom to spend money on non-charitable activities. 2.5.4 Educational organisations

Charities that are advancing education are a benefit to the community. The term “advancing education” includes not only the obvious purpose of schools and universities but also other activities of benefit to the public such as research or information services. However, there are commercial organisations providing similar services and the main distinction between the commercial and the charitable organisation is likely to be the intention or not to make a profit.

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Hospitals

Many private hospitals (ie non-NHS) and nursing homes are operated by charities. Others may be profit-making commercial organisations. NHS hospitals and NHS Trusts are Crown bodies for VAT purposes and are not charities. However, such hospitals may have associated charities, leagues of hospital friends etc which exist to help and raise money for the hospital. NHS Hospital managers and consultants frequently act as trustees of charitable Trusts founded to help the hospital in its work and funded from donations or bequests. These charitable Trusts will usually have charitable status in their own right.

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Political organisations

Charities freedom to engage in political activities is limited and they cannot have political objects. They are constrained by law to reasonable lobbying to further their non-political objects. The Charity Commission have set guidelines to specify what is and what is not acceptable. Many political organisations operate along the same lines as charities. For example they will engage in fund-raising and rely on volunteer support. They will usually have a membership structure. They are not charities because they pursue political objects; as do lobby groups, eg Greenpeace and Amnesty International. (However, please note that some political organisations may set up a charitable foundation or trust which does not get involved in the lobbying.).

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Housing Associations

Particular care should be taken with Housing Associations. Some have charitable status and some not. Charitable Housing Associations usually exist to provide housing for a particularly needy sector of the community eg the elderly, people with disabilities or those who are homeless. Other Housing Associations exist to provide housing generally, or to serve a particular locality; these will not necessarily be charities. You will find that some Housing Associations are Industrial and Provident Societies. This does not entitle them to claim the charity reliefs - you will need to check if the Housing Association is registered with the Charity Commission or recognised as a charity by HMRC.