Charities & Not For Profit

VAT Compensation Scheme for Charities

Noel Delaney Noel Delaney

The VAT Compensation Scheme for Charities, announced in Budget 2018, is now open for application in respect of the year ended December 2018. Intended to alleviate the VAT burden on charities, and to partially compensate for VAT incurred in the day to day running of charities, the initiative applies to VAT incurred in expenditure on or after 1 January 2018. Claims must be submitted by the 30 June of the year following the calendar year to which the claim relates. VAT paid prior to 1 January 2018 cannot be reclaimed.

Eligibility Criteria

In order to qualify for this scheme, a charity must, at the date of claim and at the date the expenditure was incurred be:

  • Registered with Revenue and hold a charitable tax exemption (CHY); and
  • Registered with the Charities Regulatory authority.

Basis of claim

The quantum of a claim available to a specific charity is determined by reference to the level of non-public funding received. For example, if a charity had total funding of €100,000 in a year, with €60,000 from donations and €40,000 from Government grants, it would be entitled to make a claim for 60% of the VAT incurred on expenditure on goods or services that were used by the charity for charitable purposes.

It is important to note that a total annual capped fund of €5 million is available for paying claims under the scheme. Where the total claims received exceed this amount, claims will be paid out on a pro-rata basis. Claims are submitted via the Revenue Online System. The scheme will be reviewed in 2022.

Should you have any questions on the scheme or its administration, or wish to seek assistance in submitting a claim, please do not hesitate to contact your usual Grant Thornton contact.