Charities can reclaim a portion of their VAT costs based on non-public funding ahead of the 30 June deadline. Liam Farrell explains how to do it
Charities are entitled to claim a refund of a proportion of their VAT costs based on the level of non-public funding they receive, but the deadline to submit the application – 30 June – is fast approaching.
Making a claim
Where the total amount of eligible claims from all charities in each year exceeds the capped amount, claims will be paid on a pro-rata basis.
The cap on this has increased to €10 million from 1 January 2024.
To qualify for this scheme, a charity must, at the date of claim and at the time the qualifying expenditure was incurred:
- be registered with Revenue and hold a charitable tax exemption (CHY) under section 207 Taxes Consolidation Act (TCA) 1997; and
- be registered with the Charities Regulatory Authority (CRA).
For a charity to submit a claim, they must have:
- a tax registration number issued by Revenue;
- bank account details; and
- a registered Charity Number (issued by the Charities Regulatory Authority).
A claimant must also hold a current tax clearance certificate when making a claim.
Claims for VAT compensation must be submitted through e-Repayments on Revenue’s Online System (ROS). These claims, along with any supporting documentation, must adhere to the required format and meet the deadlines specified by Revenue.
Claims can be submitted annually between 1 January and 30 June for eligible VAT paid in the previous calendar year. Claimants may amend their claims until 30 June of the submission year, but not thereafter.
The maximum claim amount is €1,000,000, the minimum claim amount is €500, and the minimum repayment is €5. Additionally, claimants must declare and certify that all information provided is correct.
To support a claim, detailed documentation is required, including a breakdown of total income, qualifying income and qualifying expenditure. VAT records, such as invoices and receipts, must be retained by charities for six years.
There must be evidence that the goods and services claimed were used for charitable purposes, that the VAT was paid in the relevant year, and that the income used for calculations was received in that year.
The most recent set of audited accounts, corresponding to the financial year of the claim or the claim submission year, is also necessary.
Furthermore, claimants must provide evidence that the charity was not entitled to a VAT deduction or refund under other legislation and must show compliance with the VAT Consolidation Act 2010, the Taxes Consolidation Act 1997, the Stamp Duties Consolidation Act 1999, and related secondary legislation.
Qualifying income
The proportion of a charity’s income that is privately funded is known as ‘qualifying income’. This excludes publicly funded income and income already excluded from the total income calculation.
To calculate qualifying income, a charity should deduct from its total income for the year to which the claim relates all non-qualifying income.
Some examples of non-qualifying income are Charitable Donations Scheme repayments, Charities VAT Compensation Schemes refunds, county council grants and charity shop income, among others.
Qualifying expenditure
Expenditure in respect of which a VAT refund may be sought under this scheme is described as “qualifying expenditure”. Conditions apply to the calculation of qualifying expenditure are as follows:
- compensation may be sought in respect of VAT which was paid in the State on certain expenditures and in the year to which the claim relates;
- that expenditure must have been for goods or services used by the charity only for its charitable purpose; and
- if a charity is entitled to receive any relief, refund, repayment or deductibility under any other scheme or legislation administered by Revenue, it may not include that amount in the calculation of a claim.
What next?
Applications under the scheme should be submitted by 30 June 2024 in respect of calendar year 2023. It is important to note that claims submitted after the 30 June deadline will not be accepted under any circumstances.
Liam Farrell is Director of Accounts & Business Advisory Services at Azets
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