Potential claims for overpaid VAT on fundraising events

In 2023, Yorkshire Agricultural Society (YAS) won a First Tier Tribunal, which could impact charities' approach to fundraising events where there is more than one purpose. The decision resolves a dispute with HMRC over whether a dual-purpose event could be treated as VAT exempt.

According to HMRC’s interpretation of the VAT legislation, fundraising events could only be VAT exempt if, among other conditions, the primary purpose is fundraising and it is clearly held as a fundraiser. HMRC tried to argue that as there was a dual purpose to the events and therefore fundraising was not the primary purpose. The Tribunal rejected HMRC’s arguments and agreed that there can be more than one purpose, without removing the ability to apply the VAT exemption.

Why is this decision important and what does this mean for charities?

This case pushes back the boundaries of HMRCs restrictive approach to charities qualifying for the fundraising exemption. As a result, events including ticketed charity events, which were previously treated as taxable for VAT purposes, may now qualify for VAT exemption. It should be noted that all income from the event can qualify for exemption.

Charities should review any fundraising events that have taken place or are due to be run where they have not taken advantage of the exemption, as this could be applicable. It may be possible to claim for over-declared output tax on events that have taken place during the last four years where the exemption’s conditions have been met.

There may also be opportunities for charities that have been assessed for output tax on these events by HMRC to revisit and challenge the assessment.

It should be noted that Charities looking to make a claim will also need to consider the input tax restriction and partial exemption position from the change of previously taxable income to exempt.

For further information on VAT on fundraising events, please contact Hayley Hill or your usual Crowe contact.