Charities VAT Compensation Scheme

Revenue recently issued legislation and guidance on the VAT Compensation Scheme for Charities announced in Budget 2018. The purpose of the scheme is to reduce the burden of irrecoverable VAT on charities and will apply to expenditure incurred after 1 January 2018. Revenue guidance and legislation outlines that qualifying charities will be entitled to claim a refund on a proportion of their VAT costs incurred based on the level of non-public funding they receive.

For the purposes of the scheme a qualifying charity must be:

  • A charity registered with Irish Revenue who hold a charitable tax exemption;
  • Registered with the Charities Regulatory Authority.

A claim under the compensation scheme should relate to a calendar year and must be submitted on or before the 30 June of the following year through the Revenue Online System (ROS). For example a charity wishing to make a claim under the scheme for 2018 will be making a claim for the period 1 January 2018 to 31 December 2018 which must be filled on ROS on or before the 30th of June 2019.

A claim under the scheme is based on the qualifying income/expenditure of the charity and on qualifying tax incurred. Qualifying income would be the proportion of the charities income that is privately funded income as a percentage of total income (privately and publically funded). Qualifying expenditure for the purposes of the scheme is expenditure that would be deductible for VAT purposes which has been incurred on goods and services which were used by the charity for its charitable purpose. Qualifying tax is referred to as VAT that has been paid on qualifying expenditure.

There are a number of conditions a charity must meet to make a claim under the scheme which include but are not limited to the following:

  • the charity must hold a current Tax Clearance Certificate;
  • the charity must retain VAT records for 6 years and those records may be sought by Revenue at any time;
  • Have evidence that the goods and service to which the claim relates where used for charitable purposes;
  • Satisfy Revenue that the VAT incurred on qualifying expenditure has been paid;
  • Complied with all of the obligations of the VAT Consolidation Act 2010;
  • A written declaration from the CEO or CFO of the charity to the validity of the claim;
  • Audited Financial Statements.

There is a total annual capped fund of €5m under the scheme which is available for refund and if the amount of eligible claims made by charities exceeds this fund the claims will be paid on a pro rata basis.

Should you have any queries or would like our assistance making a claim under the charities VAT compensation scheme, please contact Christopher Connolly or your usual VAT contact.

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