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HMRC internal manual

VAT Charities

Free export of goods

Like purely commercial organisations, charities sometimes sell goods to customers outside the EC. In such circumstances the normal export rules apply. However, charities (primarily those engaged in international relief) will sometimes export goods to disaster areas. For example, medical equipment, tents, blankets, food etc. These exports are likely to be made up of goods that have been donated to the charity and goods that the charity has purchased for the specific circumstances of the particular disaster.The supply of these goods by the charity will be free of charge. As such the supply would not normally qualify as a business supply. This would mean that the charity was unable to recover any input tax incurred on the purchase or export of the goods.

In order to enable charities to recover input tax associated with such supplies Section 30(5) of the VATA 1994 was amended as follows:

30(5) The export of any goods by a charity to a place outside the member States shall for the purposes of this Act be treated as a supply made by the charity -

(a) in the United Kingdom, and

(b) in the course or furtherance of a business carried on by the charity.  

By making the export a business supply the charity is able to recover any VAT on the purchase of goods and the overhead costs associated with the export. A charity that is not registered for VAT may also register for VAT on the basis of this provision.