VAT ruling broadens the scope for fundraising event exemptions

HMRC has historically interpreted qualifying fundraising events for VAT purposes very narrowly, insisting that the primary (and sole) purpose must be fundraising. However, a recent ruling by the Upper Tribunal regarding the Yorkshire Agricultural Society (YAS) challenges HMRC's position. This decision may enable more events to qualify for VAT exemption, potentially expanding beyond HMRC's previous acceptance criteria.

Background

• According to UK VAT Law and HMRC’s interpretation, VAT exemption applies only to events where the primary purpose is fundraising. Additionally, there is a limit of 15 events of the same type, at the same location within a single accounting year.
• HMRC has insisted that ‘primary purpose’ must be the sole purpose. If an event has other primary or main purposes, then according to HMRC, it cannot qualify for the exemption.
• The YAS holds an annual fair with two primary aims: fundraising and education. This dual purpose is clear from the event’s aims and how it has been presented to visitors.
• The First-tier Tribunal and now the Upper Tier have agreed that this event qualifies for VAT exemption as a fundraising event. This latest Upper Tier decision creates a legal precedent which HMRC must now follow, although they may seek to further appeal these matters.

What does that mean for your charity?

• Charities run events for a number of reasons, but often one of the key or primary reasons is fundraising requiring a surplus to continue. As long as these aims are charitable, we consider there is an opportunity to qualify.
• All charities should examine their charged events and consider whether the fundraising exemption may now apply or should have been applied anyway.
• Any students’ unions that have previously been unable to apply the fundraising exemption for annual events due to the Loughborough Upper Tier case, may now qualify as an example. This decision appears to override the previous case and gives a significant potential opportunity for VAT savings.

What should you do?

Review your charged events, and how you apply VAT to those charges, in light of this recent legal precedent. If you have charged VAT in the last four years on fundraising events, you may have a claim.

For more information contact Chris Dears or your usual Crowe contact.