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HMRC internal manual

VAT Charities

Business and non-business: Bequeathed property

Non-business implications can arise from situations involving bequests of property. The key issue that usually arises in connection with bequeathed property is whether the expenses associated with bequests of property can be treated as business expenses of the charity.

The charity cannot deduct input tax on expenses arising from the sale of bequeathed property for two reasons:

  • A will may instruct that a property should pass to a charity. The subsequent sale of such property is not regarded as a business activity. Any related tax is not input tax and cannot be reclaimed.


  • A will may instruct that property should be sold with the resulting proceeds donated to a named charity. Executors of the will or trustees of an estate may attempt to avoid the VAT charge by passing invoices related to the sale to the charity, so that it can reclaim the VAT (if the charity is registered for VAT). Expenses related to the liquidation of the assets of an estate are for services supplied to the executors or trustees. Any VAT paid is not for the purpose of the charity’s business and cannot be reclaimed as input tax.