2. What qualifies for VAT relief

Charities pay VAT on all standard-rated goods and services they buy from VAT-registered businesses. They pay VAT at a reduced rate (5%) or the ‘zero rate’ on some goods and services.

What qualifies for the reduced rate

Your charity pays 5% VAT on fuel and power if they’re for:

  • residential accommodation (eg a children’s home or care home for the elderly)
  • charitable non-business activities (eg free daycare for the disabled)
  • small-scale use (up to 1,000 kilowatt hours of electricity a month or a delivery of 2,300 litres of gas oil)

If less than 60% of the fuel and power is for something that qualifies, you’ll pay the reduced rate of VAT on the qualifying part and the standard rate (20%) on the rest.

Qualifying fuel and power includes gases, electricity, oils and solid fuels (eg coal). It does not include vehicle fuel.

What qualifies for the zero rate

Find out about the conditions you must meet so that your charity pays no VAT (the zero rate) when you buy:

VAT-free goods from outside the EU

Charities don’t pay VAT on goods imported from outside the EU as long as they’re benefiting people in need by providing:

  • basic necessities
  • goods to be used or sold at charity events
  • equipment and office materials to help run your organisation for the benefit of needy people
  • goods to help deal with disasters within the EU