Sobell Rhodes advise on VAT exemptions on the cost of fundraising events
Most charities are aware that they can organise up to 15 fundraising events of the same type in the same place each year and the income received therefrom will be exempt from VAT. The downside, of course, has always been that any VAT incurred on the costs of such events such as venue hire, T-shirts and mugs to be sold at the event, cannot be reclaimed.
For sometime, it has been unclear to what extent the exemption applies to various aspects of large-scale charity challenge events such as walking the Great Wall of China or cycling across the Sahara.
However, that issue has now been addressed by HMRC in collaboration with the charity sector.
Michael Harrison, partner with specialist charity accountants Sobell Rhodes explains “Fundraising events that include a package of both travel and accommodation, or bought in accommodation, or more than two nights’ accommodation from the charity’s own resources, do not fall within the exemption”.
Michael, who has a wealth of experience in charity accounting, continued “If the event is non-qualifying and the charity is acting as a disclosed agent, it must apply the rules explained in Notice 709/6 ‘Travel agents and tour operators”.
“If the event is non-qualifying and the charity is acting as principal or as undisclosed agent, it must apply the rules explained in Notice 709/5 ‘Tour Operators’ Margin Scheme”.
The new guidance is effective from 31 July 2008 but charities which have contracts in place on that date may continue to apply the old procedures. However charity accounting is a complex area and professional advice should be sought from specialist charity accountants.