Charging charities at lower rates of VAT

There are special rules, under which a VAT-registered business can sell certain goods and services to charities at the zero or reduced rate of VAT. Before charging VAT at a lower rate, you must be able to show evidence that the charity is eligible. This is usually done by obtaining suitable evidence of the charity’s status and a written declaration or ‘certificate’ confirming they meet the conditions for a particular VAT relief.

Charities are legally required to provide an eligibility certificate when you supply qualifying building or construction services to them at zero VAT. A declaration is not required for other supplies but is recommended to prove the charity is eligible for the relief. Completed declarations should be held for at least 4 years.

The reduced VAT rate applies on the sale of fuel and power in certain circumstances to an eligible charity. The zero VAT rate applies on a wider range of supplies including the aforementioned construction supplies and items including certain medical and veterinary equipment, aids for disabled people, advertising and items for collecting donations, drugs and chemicals and equipment for making ‘talking’ books and newspapers.