Running a charity comes with its own tax rules, and VAT often catches trustees and finance staff off guard. Many people assume charitable status means no VAT at all, but the reality is more specific: charities pay VAT on most things, with a set list of exceptions on certain purchases. This article sets out what charities can buy VAT-free or at a reduced rate, when registration is required, and how to actually claim these reliefs with a supplier. Knowing what’s on that list and how to actually claim it can make a real difference to a charity’s running costs.
Key Takeaways
- Charities are not automatically exempt from VAT and must register once taxable turnover exceeds £90,000 in any rolling 12-month period, the same as any other organization.
- A defined list of goods and services can be bought free of VAT, including advertising, equipment for disabled people, medical and scientific equipment, rescue and emergency equipment, and talking book equipment.
- Fuel and power qualify for a reduced rate rather than a zero rate, with an automatic lower rate for small amounts of use.
- Goods donated to a charity by a business can now be passed on VAT-free up to set value limits, following the relief introduced on 1 April 2026.
- Relief isn’t automatic. A charity must give its supplier a signed declaration and be ready to show proof of its charitable status.
- These reliefs are tied to UK-based, HMRC-recognised charities, so overseas branches generally won’t qualify even when buying from a UK supplier.
- Because the rules depend heavily on the precise nature and use of a purchase, professional advice before a major purchase can prevent costly mistakes.
Charities Still Pay VAT on Most Things
It’s a common misunderstanding that becoming a charity removes VAT from the picture entirely. In practice, charities are treated much like any other organization: they pay VAT on most goods and services they buy, and if their sales exceed a certain threshold, they must register and charge VAT themselves, just like a regular business would. What makes charities different is a specific set of reliefs that let them buy certain things without paying VAT, or at a lower rate, plus special treatment for money that isn’t really “sales” at all, like donations and grants.
This last point matters. A donation given freely, with nothing given back in return, doesn’t involve VAT at all. Money from things like ticketed events, shop sales, or paid-for services is treated differently and might or might not carry VAT, depending on what it is. Many charities have a mix of these going on at once, which is why sorting out a charity’s overall VAT position can be complicated.
When a Charity Needs to Register
A charity must register for VAT if its taxable turnover exceeds £90,000 in any rolling 12-month period, or if it expects to exceed that figure within the next 30 days, under the same registration rules that apply to any other business. Below that limit, a charity can still choose to register, which is often worth doing if it means it can reclaim VAT on its own costs.
A charity that’s already registered can apply to deregister if it reasonably expects its taxable turnover to fall below £88,000 over the next 12 months. This test works differently from the registration threshold: rather than looking back at turnover already earned, HMRC assesses whether the charity’s taxable turnover is expected to stay below £88,000 going forward. A charity whose income consists entirely of VAT-exempt supplies, or which has no taxable business activities, will generally not be able to register for VAT, since registration depends on making taxable supplies rather than on being a charity.
What Charities Can Buy Without Paying VAT
This is where the real savings are, and it applies only to a specific list of items, not to everything a charity might buy.
Advertising is one of the most useful ones. When advertising is supplied to a charity by a third party and is communicated to the general public, it can be zero-rated, including job adverts for staff. This relief works best for advertising that reaches the public generally, such as adverts in newspapers, on posters, or on billboards. Advertising aimed at specifically selected or targeted individuals falls outside the relief and remains standard-rated. This includes listings that appear only in the results of a search someone has run, and adverts served to individuals who are logged into a personal account, where the platform uses tools to select and display advertising to that signed-in user. Digital advertising adds a further layer of complexity, since some forms of audience-targeted online advertising qualify while others don’t, depending on how the targeting works.
Equipment for people with disabilities is another big one. If a charity buys certain goods or services and makes them available to disabled people for their personal use, this can be zero-rated. This can also cover building work like widening a doorway, adding a ramp, or adapting a washroom.
Building work for a new charity building, or on certain existing buildings, can also be zero-rated, but only where the building will be used purely for non-business purposes, such as a village hall. This is distinct from an exempt supply: zero-rating means no VAT is charged, but the supplier can still recover VAT on its own related costs, whereas an exempt supply carries no VAT recovery for the supplier either. This area has strict conditions, including a specific test for whether the charity’s use of the building counts as “business” at all, and it’s worth checking eligibility with a specialist before starting any building project.
Medical and scientific equipment can be zero-rated when a charity buys it to donate to a hospital, research body, or similar organization, or when the charity itself is that kind of body and buys it for its own use. Medicines bought by a charity involved in treating people or animals, or in medical research, can also be zero-rated, as can substances and chemicals used directly in medical or veterinary research.
Rescue and emergency equipment gets similar treatment. Charities providing first aid or rescue can buy specialist communication, light-enhancing, and heat-detecting equipment zero-rated. Charities running lifeboats can buy the boats themselves, along with slipways and launching and recovery equipment, zero-rated, and a charity running an ambulance service can buy a specially designed vehicle, or have a vehicle adapted to that standard, on the same basis, along with its repair and maintenance. Training models used to teach resuscitation are also covered.
Talking book equipment for blind or severely visually impaired people may be zero-rated where specific conditions are met. This can include sound recording and reproduction equipment that has been designed or specially adapted for recording or reproducing speech, supplied to charities that lend the equipment free of charge to blind or severely visually impaired people. The relief is narrow, so eligibility should be checked before purchase.
Goods donated to a charity by a business now also receive simpler treatment. From 1 April 2026, a business can donate goods to a charity, for the charity to pass on or use in its own non-business work, without having to account for VAT on the donation. This applies to items worth up to £100, or up to £200 for household appliances, furniture, flooring, computers, tablets, and mobile phones. Alcohol, tobacco, and vaping products aren’t included.
Fuel and Power Get a Lower Rate, Not a Zero Rate
Unlike the items above, fuel and power don’t qualify for the zero rate, but they do qualify for a reduced rate rather than the full rate. This applies where the fuel or power is used in residential accommodation, such as a care home or hospice, or for charitable non-business activities, such as free day care. There’s also an automatic lower rate for small amounts of use, such as electricity supplied at no more than 1,000 kilowatt-hours a month, or gas oil delivered in quantities of no more than 2,300 liters. Where only part of the usage qualifies, the charity needs to provide the supplier with a certificate stating the qualifying proportion, and the supplier applies the reduced rate to that portion while charging the standard rate on the rest. However, when the qualifying proportion is 60% or more, the entire supply can be charged at the reduced rate rather than only the qualifying portion.
How to Actually Claim These Reliefs
None of this happens automatically, and a charity doesn’t apply to HMRC directly for these reliefs. Instead, the charity gives its supplier a signed declaration confirming it meets the conditions for that particular relief, and it’s then the supplier’s job to charge the right amount of VAT based on that. The charity also needs to be ready to show proof of its charitable status if asked, such as its Charity Commission number or its recognition from HMRC.
It’s worth keeping copies of every declaration alongside the related invoices, since these can be checked later. Getting the wrong VAT treatment on a purchase, in either direction, can be costly and time-consuming to sort out afterward.
Where Overseas Involvement Comes In
To claim any of these reliefs, the organization must meet HMRC’s definition of a charity for VAT purposes, which is more specific than simply carrying out charitable work. Having trustees, donors, or supporters based outside the UK doesn’t change anything on its own, since the reliefs are about the status of the organization itself. The rules are stricter than they once were: since 1 April 2024, UK charity tax reliefs, including VAT relief, are only available to organizations subject to the jurisdiction of a UK court, meaning charities based outside the UK, including those in the EU, no longer qualify regardless of how their charitable work is carried out. An organization that operates internationally, or that has overseas branches, therefore needs to check that the UK entity itself meets HMRC’s conditions and has been recognized by HMRC as a charity for UK tax purposes before assuming a purchase will be VAT-free. Charities with international operations should keep this distinction in mind rather than assuming that charitable status recognized in another country will carry over.
Getting the Detail Right
Because these reliefs depend on the precise nature of what’s being bought and how it will be used, mistakes are easy to make and can be expensive to put right. Getting advice before a major purchase, especially for building work or medical equipment, helps avoid both paying VAT unnecessarily and the risk of an incorrect declaration.
Conclusion
VAT for charities isn’t a single switch that can be turned off; it’s a patchwork of specific reliefs that apply to specific purchases, each with its own conditions. Getting this right means understanding what your charity is buying, how it will be used, and whether the right paperwork is in place before the invoice is settled, not after.
Frequently Asked Questions
Yes. Charities are treated much like any other organization for VAT purposes and pay VAT on most of their purchases. A specific list of reliefs allows certain purchases to be made VAT-free or at a reduced rate, but there’s no blanket exemption.
Only if its taxable turnover exceeds £90,000 in any rolling 12-month period, the same threshold that applies to any business. A charity below that level can still register voluntarily, and one already registered can deregister if turnover falls below £88,000. Still, a charity with no taxable sales, or only exempt income, cannot register at all.
The charity gives its supplier a signed declaration confirming it meets the conditions for that particular relief, along with proof of its charitable status if asked. HMRC isn’t involved directly in approving individual purchases; it’s the supplier’s responsibility to charge the correct rate based on the declaration.
Sometimes, but only where a new building, or work on an existing one, will be used purely for non-business purposes, such as a village hall. This is one of the stricter reliefs, with a specific test for what counts as business use, so it’s worth getting advice before any building project begins.
No. The location of trustees, donors, or supporters doesn’t by itself prevent a charity from qualifying for VAT reliefs. However, the organization must meet HMRC’s definition of a charity for VAT purposes and should carefully check whether any relief applies where overseas branches or international structures are involved.
