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HMRC internal manual

VAT Government and Public Bodies

HM Revenue & Customs
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Section 33 bodies: recoverable VAT: donated funds

Refunds can be claimed where purchases are made from funds given to a section 33 body for specified non-business purposes so long as the body:

  • makes the purchase itself in the sense that it
    • places the order
    • receives the supply
    • holds a VAT invoice in its own name, and
    • makes payment
  • retains ownership of the purchase and uses it for its own non-business purposes, and
  • keeps sufficient records of the purchase and the purpose for which it was made to allow easy identification.

Examples of supplies that are likely to meet these conditions are those used:

  • in local education authority maintained schools and paid for with donations from parent-teacher associations and school funds
  • in local authority welfare establishments and paid for with donations from amenity funds
  • by local authority homes and schools for the disabled, such as mini-buses and TV sets, and paid for with donations from voluntary bodies, and
  • in local authority owned halls, or halls where the local authority is sole managing trustee, and paid for with donations from management or fund raising committees.

Some ‘donations’ are not donations in the strict sense, but represent the consideration for a supply. Examples are those intended to benefit the donor or a third party, for example donations for such things as advertising or sales promotion. Purchases made with these funds do not fall within the section 33 arrangements as they do not relate to non business activities. Any VAT incurred is not therefore recoverable under section 33, but may be recoverable as input tax under the normal VAT rules.