Jul 11, 2025
VAT and Charities: How Non-Profits Can Navigate Complex Reliefs and Avoid Costly Mistakes
Understanding VAT Rules for Charities and Non-Profits
Charities and non-profit organisations play a vital role in society — but when it comes to VAT, the rules can be especially tricky. Some activities are exempt, others are standard-rated, and there are special reliefs available. Understanding where your charity sits can be the difference between maximising funds for your cause or losing thousands in unexpected VAT liabilities.
The Basics of VAT and Charities
Charities are not automatically exempt from VAT — they must follow the same registration thresholds as businesses (£90,000 taxable turnover as of 2024/25).
Certain income streams are VAT-exempt or zero-rated.
Other activities are fully taxable at 20%, even if the organisation is a registered charity.
Common VAT Treatments for Charities
1. Fundraising Events
Income from one-off fundraising events is usually exempt from VAT, provided the event is run by a charity.
2. Sales in Charity Shops
Sale of donated goods = zero-rated.
Sale of new goods (e.g. bought in stock, branded merchandise) = standard-rated (20%).
3. Property and Land Use
Letting or licensing land/buildings = usually exempt, but VAT may apply if the charity has opted to tax.
Construction of new charitable buildings = can be zero-rated if conditions are met.
4. Services Provided to Beneficiaries
Some services provided directly for the benefit of disabled or vulnerable people can qualify for zero-rating (e.g., adaptations, special equipment).
Example: A Charity Shop
A local hospice runs a charity shop.
All donated clothes and items sold are zero-rated — no VAT to pay, and the charity can reclaim VAT on certain running costs.
But if they stock new greeting cards and gifts, those sales are 20% VAT-able.
Without clear accounting, the charity risks misreporting VAT — and facing HMRC penalties.
Why It Matters
VAT mistakes can eat into charitable funds.
Reliefs exist, but they must be applied correctly — or HMRC can demand backdated tax plus penalties.
An expert adviser ensures that VAT planning maximises reliefs and avoids pitfalls, protecting the organisation’s resources.
👉 At Wexley & Associates, we support charities and non-profits in structuring their VAT treatment properly, so they can focus on their mission — not HMRC disputes.
Simplify VAT and Maximise Reliefs for Your Charity
👉 Running a charity is challenging enough without worrying about VAT. Contact Wexley & Associates today to ensure your charity is making the most of VAT reliefs — while staying fully compliant.
