Charities VAT Compensation Scheme

Overview
A  new VAT Compensation Scheme for Charities has been introduced to compensate  charities for the VAT paid on the day to day expenditure incurred in running the charity.  The scheme applies to VAT paid in Ireland on qualifying expenditure incurred on or after 1st January 2018.  The time limit for submitting claims for compensation for 2018 is the 30thJune 2019.   

Under the scheme, charities are entitled to claim a refund of a proportion of their VAT costs based on the level of non-public funding they receive. Where the total amount of eligible claims from all charities in each year exceeds the total annual capped fund of €5m, claims will be paid on a pro-rata basis. 

Qualification to make a claim and period for which a charity may make a claim
To be a qualifying charity for this scheme, a charity must at the date of claim and at the time that the qualifying expenditure was incurred:
•    be registered with Revenue and hold a charitable tax exemption (CHY) under Section 207 Taxes Consolidation Act (TCA) 1997,
•    be registered with the Charities Regulatory Authority (CRA).
Claims may relate to one calendar year only and can be submitted up to 30th June of the year following the calendar year to which the claim relates.

Income and expenditure
It is important to note that any reference to income received or expenditure paid must be in the calendar year to which the claim relates. The scheme operates on a cash basis. This means that if a charity orders goods and services in Year 1 and does not pay for them until Year 2, the amount due to be paid cannot be included as expenditure of Year 1.

Calculation of the claim 
“Qualifying expenditure” is expenditure incurred on goods and services used only by the charity for its charitable purpose.  The claim for VAT on qualifying expenditure is apportioned on the basis of the amount of privately funded income relative to the total income of the charity.

Conclusion
It merits mention that charities wishing to submit a claim must meet Revenues criteria and conditions. It is important to note that the minimum amount of claim is €500.  As previously mentioned, the total annual amount available to be paid out under the scheme is capped at €5 million, so the amount that may be paid to a charity depends on the total value of claims from all eligible applicants.  If you wish to submit a claim or require further guidance, please do not hesitate to contact Padraig O’Donoghue for further information.