Many people assume that charitable status removes an organisation from VAT altogether. Charities operate within the VAT system in the same way as other organisations, although a range of reliefs and exemptions applies to charitable activity. The two areas that cause the most confusion are donations and fundraising events, which are treated very differently under VAT law.
In this article, we look at when a donation is genuinely outside the scope of VAT, when it stops being treated as one, how the fundraising event exemption works, the conditions an event must meet, and what happens when those conditions are not met.
KeyTakeaways
-
A payment given without any material benefit in return generally falls outside the scope of VAT.
-
Once a donor receives something of value in exchange, VAT can apply to some or all of the payment.
-
Gift Aid and VAT are separate systems governed by different legislation.
-
A qualifying fundraising event receives a mandatory VAT exemption under Group 12 of Schedule 9 to the Value Added Tax Act 1994 (VATA 1994). A charity cannot elect to charge VAT instead.
-
If more than 15 similar events are held at the same location during an accounting year, the exemption is generally lost for the whole series.
-
Following HMRC v Yorkshire Agricultural Society [2025] UKUT 00004 (TCC), decided on 9 January 2025, fundraising may be one of two or more inseparable primary purposes, provided fundraising remains a primary purpose and the purposes cannot realistically be ranked in importance.
-
Where an event does not qualify, a charity may still limit its VAT exposure by using a genuine minimum admission fee paired with a separate voluntary contribution.
Do Charities Pay VAT on Donations and Fundraising Events?
Charities are not exempt from VAT. A genuine donation, where the donor receives nothing of value in return, falls outside the scope of VAT because there is no supply for consideration. A fundraising event is different: it is a supply, but one that receives a mandatory VAT exemption under Group 12 of Schedule 9 to VATA 1994, provided the event meets HMRC’s qualifying conditions. Where a donor receives an identifiable benefit, or an event fails those conditions, VAT becomes chargeable.
Is my charity donation actually tax free?
In principle, yes, a payment given without any material benefit provided in return falls outside the scope of VAT. VAT applies where there is a taxable supply of goods or services made for consideration. The legal question is not whether the giver “expects” something back; it is whether the charity has provided a reciprocal benefit that amounts to consideration. If a donor receives no goods, services, naming rights or preferential treatment, there is no taxable supply. This applies whether the payment arrives through a street collection, a bank transfer, a text donation, an online giving page or a legacy.
The complication is that many payments described as donations include an associated benefit. HMRC looks at the substance of the arrangement rather than the label used. The main questions are:
-
Does the payer receive something specific and identifiable in return?
-
Is the amount left to the payer's discretion, or does it function as a price?
-
Would someone who declined to pay still receive the same benefit as someone who paid?
Where a payment secures a clear, identifiable benefit, all or part of it is likely to be treated as consideration for a taxable supply rather than a donation.
Is money from my sponsor treated as a donation or as taxable income?
It depends on what the sponsor receives in return. Where sponsorship confers a genuine benefit on the sponsor, such as logo placement, branding or hospitality, the payment is generally treated as consideration for a taxable supply, subject to VAT at the standard rate of 20%. A true donor has little or no influence over what is provided and cannot demand recognition. Under HMRC’s sponsorship guidance (VAT Notice 701/41: Sponsorship), where an agreement clearly separates an unconditional donation from a paid-for promotional element, and the split reflects what happens rather than just how it is worded, the donation element can still fall outside the scope of VAT.
Does Gift Aid mean I don't have to worry about VAT?
Gift Aid and VAT are separate regimes. Whether a payment qualifies for Gift Aid does not automatically determine its VAT treatment, and the VAT treatment does not automatically determine Gift Aid eligibility. Gift Aid is an income tax relief that allows a charity to reclaim basic rate tax, worth an additional 25p for every £1 given by a UK taxpayer, provided the donor has made a valid declaration and paid enough UK tax to cover the amount reclaimed. Gift Aid eligibility does not affect VAT treatment, and VAT treatment does not affect Gift Aid eligibility. A payment can be Gift Aid eligible and outside the scope of VAT at the same time, which is the normal position for a straightforward donation.
I got the goods for free, so do I still charge VAT when I sell them?
Sales of qualifying donated goods by a charity are generally zero-rated, so no VAT is due on the sale where the statutory conditions are met. Zero-rating is more favourable than exemption because it preserves the charity’s right to recover related input VAT.
A separate relief, introduced from 1 April 2026, Schedule 8, Group 15 to VATA 1994, provides that businesses donating certain goods to charities for onward donation do not need to account for VAT on those goods, provided the relevant statutory conditions are met.
Why is my charity ball VAT exempt but my charity shop sale isn't?
Because the exemption applies to qualifying fundraising events under Group 12 of Schedule 9 to VATA 1994, not to a charity’s routine trading such as shop sales, this exemption is mandatory rather than optional. A charity cannot elect to charge VAT on a qualifying event, even if doing so might let it recover more input tax on costs. Where the conditions are not met, the income is standard rated, unless a specific item independently qualifies for zero or reduced rating. Because the exemption is mandatory rather than optional, charities sometimes take deliberate steps to structure an activity outside the exemption where VAT recovery would be commercially more beneficial than exemption.
Does a fundraising event still qualify for exemption if a charity isn't running it?
Yes, provided the organiser is a charity or a qualifying body within Schedule 9 to VATA 1994, which includes certain non-charitable bodies and charity trading subsidiaries. The event must be clearly organised and promoted primarily to raise money for the charity or qualifying body, and it must meet the other fundraising event conditions. A professional fundraiser or other agent may help organise the event. Still, the exemption depends on the status of the body holding the event and the purpose and structure of the event, not simply on who carries out the practical arrangements.
Does HMRC accept my event as a fundraising event, or just me?
HMRC will look at the event itself, not just the fact that the organiser is a charity or qualifying body. The event must be a planned, identifiable fundraising occasion rather than an ongoing trading activity. Since the relief is aimed at occasional fundraising rather than continuous trading, recognised examples include balls, dinner dances, concerts, film showings, fetes, horticultural shows, exhibitions, bazaars, jumble sales, car boot sales, sponsored walks or swims, quizzes, endurance events, firework displays, and auctions of goods bought specifically for sale. Running a shop or bar continuously would not typically be regarded as a fundraising event, because the relief supports occasional fundraising rather than ongoing trading activity.
The Great Yorkshire Show won its VAT appeal, so how did HMRC read purpose incorrectly?
The Great Yorkshire Show won its VAT appeal, so how did HMRC read purpose incorrectly?
HMRC had treated fundraising as needing to be the sole primary purpose of an event, an interpretation the Upper Tribunal rejected in HMRC v Yorkshire Agricultural Society [2025] UKUT 4 (TCC). Promotional material should clearly indicate that the event is being used to raise funds for the charity, and charities should retain documentary evidence demonstrating the fundraising purpose.
VAT treatment of income received from charity fundraising events, published 13 June 2025.
HMRC had interpreted the legislation as requiring fundraising to be the sole primary purpose of the event, which excluded events with more than one objective. The Tribunal found that this interpretation was inconsistent with the underlying legislation, and HMRC has accepted the decision and updated its published guidance accordingly.
As a result, an event can now have more than one primary purpose, for example both fundraising and education, and still qualify, provided fundraising remains one of those purposes and the purposes cannot realistically be ranked or separated in importance. HMRC’s post-case guidance indicates that charities should be able to evidence why the purposes are genuinely inseparable, rather than simply asserting that more than one purpose existed.
On promotion, HMRC accepted that fundraising does not need to be the dominant promotional message, provided fundraising remains a clear and genuine element of how the event is promoted. Charities previously refused exemption on a dual-purpose event may wish to reconsider that position in light of this decision, including whether grounds may exist for a repayment claim.
Do fifteen similar events at the same venue count as one series or separate ones?
Events of the same kind at the same location count as one series for the 15-event limit, so a 16th typically removes the exemption from every event in that series, not just the extra one.
To prevent the exemption from creating an unfair advantage over commercial event organisers, the exemption generally ceases to apply if more than 15 similar events are held at the same location during an accounting year. Where a 16th event of that kind is held at that location within the year, the exemption is typically lost for the entire series held at that location during the year, not only for the events beyond the fifteenth.
Location is interpreted generously. The same type of event held in different towns counts separately for each town. A multi-day event held continuously at one venue, such as a golf tournament, generally counts as a single event, while repeat performances on separate evenings, such as a run of concerts, each count individually toward the limit.
Which small events can I leave out of the count?
Small, frequent events fall outside the 15-event limit where gross weekly takings from all similar events do not exceed £1,000, measured before costs. HMRC’s fundraising events help sheet sets out a specific relief for small, frequent fundraising activity such as coffee mornings. The 15-event limit does not apply where gross takings from all similar small events do not exceed £1,000 in a week, measured before costs are deducted. If takings in each week exceed that figure, none of that week’s events benefits from this relaxed treatment, and they instead count toward the standard 15-event limit.
What can I sell at an exempt event without charging VAT?
Supplies made in connection with a qualifying fundraising event are exempt from VAT, but income generated after the event is not covered. This means items such as recordings and surplus merchandise sold after the event has ended remain standard rated. Where an event qualifies, supplies made in connection with it are generally exempt. This includes admission charges, sales of commemorative brochures and programs, sale of advertising space within those brochures, sponsorship payments tied directly to the event, and certain merchandise supplied as part of the event, subject to the normal VAT liability rules for the goods concerned. Where an item independently qualifies for zero rating, such as children’s clothing, zero rating can be applied instead, which is more favourable because it preserves the right to recover related input VAT.
Certain related items fall outside the exemption even where the event itself qualifies:
-
Recordings of the event sold after it has taken place are standard rated.
-
Surplus merchandise, such as adult t-shirts or mugs, sold once the event has ended is standard rated.
-
Packages falling under the Tour Operators' Margin Scheme, or including more than two nights' accommodation, cannot use the fundraising exemption.
What makes HMRC reject an event when the charity itself is fine?
HMRC may reject the fundraising event exemption where the event is not genuinely organised and promoted as a fundraising event, where the 15-event limit is breached, where the event is jointly organised with a non-qualifying party in a way that takes it outside the statutory conditions, or where the activity is a travel or accommodation package falling within the Tour Operators’ Margin Scheme. Examples of events that may not qualify include an AGM, a members’ social gathering, ordinary trading activity, or an event where fundraising is only incidental. Money collected through street collections, flag days and similar activities is generally outside the scope of VAT because no supply is made in return for the payment.
If half my ticket price is a donation, which half does HMRC tax?
Where an event does not meet the conditions for exemption, HMRC guidance recognises that a charity can set a basic minimum admission fee, which is standard rated and therefore taxable, while separately inviting a genuinely voluntary contribution on top that can fall outside the scope of VAT. For the additional contribution to fall outside the scope of VAT, several conditions must be met together:
-
Publicity must make clear that anyone paying only the minimum charge will still be admitted.
-
The additional contribution must not unlock any extra benefit, such as a better seat.
-
The size of any additional contribution must be left to the individual, even where a suggested amount is mentioned.
For performances, concerts or sporting fixtures, the minimum charge must not be lower than the normal commercial price for an equivalent seat. Zero Rate VAT
If publicity suggests that a higher payment improves the chance of admission or of a better position, the whole payment becomes taxable rather than being split between a taxable minimum and an out-of-scope contribution.
If I'm partly exempt, how much of my input VAT can I reclaim?
Input VAT attributable to taxable income is recoverable, while VAT incurred directly on exempt fundraising activity generally is not, with shared costs apportioned under the partial exemption rules. Charities register for VAT based on taxable business turnover, using the same thresholds set out in VAT Notice 700/1: Should I be registered for VAT? that apply to other businesses. Income from qualifying fundraising events is exempt rather than taxable and therefore does not form part of taxable turnover for VAT registration purposes. A VAT-registered charity with a mix of taxable and exempt income is common, given that fundraising events are exempt. In contrast, a VAT-registered charity that has both taxable income and exempt income will usually be partly exempt. This means it cannot automatically recover all VAT incurred on costs and must apportion input tax under the partial exemption rules in VAT Notice 706.
This means it cannot automatically recover all VAT paid on general running costs and must apportion recoverable input tax under the rules in VAT Notice 706: Partial exemption. VAT incurred directly on exempt fundraising activities will generally be irrecoverable, subject to the charity’s partial exemption calculation and any applicable de minimis limits.
Related Reliefs.
Before Your Next Event: Which SEVEN Questions Should You Answer First?
-
Retain clear evidence of the fundraising purpose in tickets, publicity, internal planning documents and event materials before the event takes place.
-
Track events by type and location across the financial year to avoid inadvertently breaching the 15-event limit.
-
Document any genuine split between sponsorship and donation in the written agreement, particularly where the sponsor receives advertising, branding, hospitality or other benefits.
-
Seek advice before large or unusual events, especially where the event has more than one purpose, involves travel or accommodation, or is run jointly with an outside organisation.
-
Consider whether a trading subsidiary is appropriate for higher-risk or large-scale fundraising, particularly where there is significant commercial trading risk.
-
Review the partial exemption position regularly, because exempt fundraising income can restrict recovery of input VAT on general overheads.
-
Where an event was taxed under HMRC’s earlier, more restrictive reading of “primary purpose”, consider whether there may be grounds for a VAT repayment claim following the Yorkshire Agricultural Society decision, subject to the normal time limits and the facts of the event.
Conclusion
Donations and fundraising events sit at the meeting point of tax law and charitable practice, and incorrect treatment can be costly in either direction. It can mean an unexpected VAT liability on an event wrongly assumed to be exempt, or relief missed on an event that actually qualified. A payment given without any material benefit in return generally falls outside the scope of VAT. A qualifying fundraising event receives a mandatory exemption, subject to the primary purpose test and the 15-event limit. Related reliefs cover donated goods, raffles, advertising and reduced-rate fuel and power. Following the Yorkshire Agricultural Society decision, HMRC’s published guidance has changed, so charities should check current HMRC guidance rather than relying on older summaries, and take professional advice for anything large, unusual or borderline.
Frequently Asked Questions
Not on a genuine donation itself. A payment given with nothing of value provided in return generally falls outside the scope of VAT, whether it comes through a street collection, a bank transfer, an online giving page or a legacy. VAT can still apply to costs a charity incurs in connection with fundraising, such as event expenses.
No. Gift Aid and VAT are separate regimes, so Gift Aid eligibility does not automatically determine the VAT treatment.
No, and it cannot choose to do so. Where an event meets the conditions in Group 12 of Schedule 9 to VATA 1994, the exemption is mandatory. A charity cannot elect to charge VAT even if doing so would let it recover more input tax on costs.
Up to 15 events of the same kind at the same location within an accounting year. Holding a 16th event of that kind at that location generally removes the exemption from the whole series, not just the events after the fifteenth.
The 15-event limit does not apply where the gross takings from all similar small events are no more than £1,000 per week. If the takings exceed that amount, the normal 15-event limit should be considered.
Yes, following HMRC v Yorkshire Agricultural Society [2025] UKUT 00004 (TCC). An event can have more than one primary purpose, such as fundraising and education, and still qualify, provided fundraising remains one of those purposes and the purposes cannot realistically be separated in importance.
A charity can charge a standard-rated minimum admission fee and separately invite a genuinely voluntary top-up contribution, provided admission is not conditional on paying more and the minimum charge is not below the normal commercial price for the same seat or ticket.
Yes, following HMRC v Yorkshire Agricultural Society [2025] UKUT 00004 (TCC). An event can have more than one primary purpose, such as fundraising and education, and still qualify, provided fundraising remains one of those purposes and the purposes cannot realistically be separated in importance.
Yes, following HMRC v Yorkshire Agricultural Society [2025] UKUT 00004 (TCC). An event can have more than one primary purpose, such as fundraising and education, and still qualify, provided fundraising remains one of those purposes and the purposes cannot realistically be separated in importance.
A reduced rate of 5% applies where the fuel or power is used for the charity’s non-business activities, under VAT Notice 701/19. If at least 60% of use at a site is non-business, the whole supply can be charged at 5%; below that, the supply is split between the reduced and standard rates.
No. Because the income is exempt rather than taxable, it does not count toward the taxable turnover threshold set out in VAT Notice 700/1.
