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HMRC internal manual

VAT Fuel and Power

Scope of the reduced rate: use by a charity otherwise than in the course or furtherance of a business

Supplies to charities benefit from the reduced rate if the fuel or power is used:

  1. by the charity; and
  2. for a non-business purpose.

Suppliers may have difficulty in determining whether either or both of these criteria are met.

What is a charity?

The term charity has no precise definition in any law: its scope has been determined mainly by case law. Charities are normally non-profit-making bodies whose objects include the relief of poverty, sickness or infirmity, and other activities beneficial to the community, such as the advancement of education, religion, nature conservation and the support of the arts.

Evidence of charitable status might be registration with the Charity Commission; but certain charities - for example universities and churches - are exempt from registration. For VAT purposes there is no distinction between those charities registered with the Charity Commission and those that are not.

What is the definition of business for VAT?

Although charities may not be deemed to have anybusiness activities under other laws, the definition of business for VAT purposes is governed by its own rules and regulations. This means that many charitable activities are deemed to be business even though they are performed for the benefit of the community.

Examples of business activities are admission charges and selling donated goods.

Further information

For further guidance on charities and business you should read VAT Notice 701/1: Charities.