Four charity tax benefits you need to know about – energy VAT relief and more

Did you see the ITV News report that up to a third of charities are paying excessive VAT on their energy bills?

We carried out a brief survey for ITV News and discovered around a third of members who responded are unaware of the VAT and CCL (Climate Charge Levy) relief that they are entitled to. As well as featuring on the ITV news, it was also on This Morning on the ITV website. This raised two issues for me:

  1. Given the pressure on so many charities to deliver more services with less resources, how many are missing out on this and other charity benefits that they are entitled to?
  2. How can NCVO help raise awareness of these issues and support our members in accessing these benefits that they are entitled to?

I am not a tax professional, and while you should consult a professional for complex tax queries I wanted to highlight this and some other tax savings that any organisation should be able to access on their own.

Energy

Registered charities are entitled to a reduced VAT charge of just 5% on their energy bills and are exempt from the CCL, however as with all tax issues it is never straightforward and it only applies to premises where at least 60% of activities carried are classified as non-business, see HMRC guidance on energy VAT relief for charities for full details. If you aren’t receiving these discounts you need to contact your energy company now to complete a charity VAT declaration form, you are also entitled to reclaim over payments for up to four years.

We are delighted that this is raising awareness and we already have members telling us that they have contacted their energy suppliers and are going to get a rebate of over payments. NCVO also partners with an energy broker, LSI who can help ensure you are paying the best rates, correct level of VAT and in collecting rebates for over payments.

Rate rebate

Charities are entitled to statutory relief from business rates – you should pay no more than 20% on any non-domestic property which is used for charitable purposes. However this 20% may be totally or partially waived by your local council, but there aren’t any rules about this and the situation varies across the country. It is up to the individual charities to apply to their local council to see if they are eligible. For more details on charity business rates relief see the HMRC website

Gift Aid

Gift Aid is an invaluable tool in most fundraisers locker – but are you getting all you are entitled to? Since April 2013 HMRC introduced the Gift Aid Small Donations Scheme allowing charities to claim gift aid on small donations, up to £20, without a gift aid declaration from the donor.

Direct mail

Another, slightly more contentious area that has recently been in the news is VAT relief on mailings, as covered by Civil Society Finance . Whilst I expect all larger charities are well aware of this – as it has a significant impact on their fundraising mailings it could be an area many smaller charities are unaware of. The basic issue is that if your mailing costs are included in the production costs of the mailing then the total costs can be zero rated for VAT, whereas if the mailing is managed separately VAT would be applicable.

Other useful resources

Climate Charge Levy

Tax

For complex queries consult a tax specialist. NCVO has a partnership with Saffery Champness, who offer free advice on VAT and Gift Aid to members under £100k turnover and a 50% discount to larger NCVO members.

Energy

LSI Utility Brokers offer NCVO members a competitive energy package. LSI can assist voluntary organisations in obtaining the best deal in a complex marketplace.

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Chris Taylor Chris Taylor is our enterprise development manager. He works with our Trusted Suppliers to help voluntary organisations to explore new ways of working and save money.

2 Responses to Four charity tax benefits you need to know about – energy VAT relief and more

  1. Martin Summers says:

    This is regarding energy bills where a charitable organisation need only pay 5% V.A.T. In the case of Wickwar Community Centre it is integrally linked to a school with shared areas (i.e. the Centre can use out of school hours). Energy suppliers are negotiated by the Unitary Authority that controls the administration of the school. The amount of energy usage by the Centre is calculated by means of internal meters, although the supplies go through one meter each for the gas and electric that cover both the school and the Centre. As a result of this the Unitary Authority bills the school and uses 20% V.A.T., and when the school does their own calculations of the Centre’s own usage, also uses the 20% rate, because that’s what they have been charged. I’d like to think I could save 15% but I have a feeling it would be more trouble than it’s worth. Any ideas?

  2. Chris says:

    Hi Martin
    Yes it probably is more trouble than it’s worth – but it depends on how much you are spending on your energy. If you think that your usage is considerable enough so that 15% is worth a considerable amount then you would need to go to the lengths of putting in your own supply which would be expensive.
    Chris