VAT: top tips for fundraising events
The London Marathon may now be over for another year, but as the runners nurse their blisters and the exercise fanatics think about their next challenge, it’s a good time for fundraisers and their finance teams remembering the key points about how VAT applies to fundraising events.
What’s subject to VAT, and what’s exempt? How do you treat registration fees and donations? Alison Hone from the Charity VAT experts Saffery Champness takes you through the essentials.
1. A charity which organises its own events for the purposes of raising funds will fall within the ‘one off fundraising event exemption’. This means that admission fees paid by participants to enter the event will be exempt from VAT. However, any costs in relation to the event will only be treated as exempt input tax and therefore recoverable if the charity is classified as ‘deminimis’ for partial exemption purposes. (Deminimis means that VAT incurred relating to exempt supplies is recoverable if the amount of VAT incurred per year is less than £7,500.)
2. The buying of a place by a charity in an event place organised commercially by a third party will be subject to VAT at the standard rate. This amount of VAT collected by the charity is paid to HMRC and referred to as output tax.
3. It is critical that the charity has an agreement in place with the participants of an event if there is a fee or sponsorship target to reach. This agreement should outline the conditions of their event place and any fees paid. HMRC can review these agreements to make sure that the charity is declaring the correct amount of VAT.
4. Output VAT will be due on the sale of third party event places in the following situations:
a) If you choose to charge a participant a registration fee which must be paid before the event takes place, this fee will be subject to VAT at the standard rate.
b) If you require a specified amount of sponsorship in advance of the event taking place, HMRC regard this as also being subject to VAT at the standard rate.
5. Donations received over and above the registration fee/ minimum sponsorship amount are exempt from VAT charges. .
6. Whether you can recover input VAT on events organised commercially by a third party depends on whether or not the charity charges a registration fee to the participant. Input VAT is the VAT which you incur on third party expenditure by your charity
a) Registration fee – full recovery of VAT on the event places
b) No Registration Fee – partial recovery of VAT on the event places
7. Input VAT recovery on other costs such as t-shirts, fundraising packs, event receptions and other associated costs will be partially recoverable as a cost of raising unrestricted funds.
8. If you offer top prizes to your fundraisers, these are not benefits for VAT purposes. However, input tax on the cost of the prizes will be irrecoverable as you will be giving them away for free.