VAT Compensation Scheme for Charities
Updated: August 2020
The Wheel was delighted to be involved in the process of developing the operational detail of the VAT compensation scheme, announced by Minister Donohoe in October 2017 and passed into legislation on 21 December 2018.
Budget 2018 introduced a VAT Compensation Refund Scheme to compensate charities for the VAT they incur on their inputs in recognition of the work undertaken by the charities sector.
The scheme is designed to compensate charities for a proportion of the VAT they pay on goods or services bought using non-statutory or non-public funds.
Under Irish and EU VAT law most charities are exempt from VAT, the possible exception being charities that carry on trading activities as part of their nonprofit remit. This means that most charities and nonprofits do not charge VAT on their services and cannot recover VAT incurred on goods and services that they purchase. Non-entitlement to VAT deductibility is a general feature of VAT exemption.
How the Scheme Works
The scheme facilitates charities to claim the VAT on input costs to the extent these relate to the charity’s privately raised income. The process of establishing eligibility and calculating and submitting a claim is outlined below through links to the Revenue Commissioners website and guidance notes:
VAT Scheme Overview – Revenue Commissioners
Guidelines Manual – Revenue Commissioners
The first year of eligibility was the calendar year 2018. The claims process is facilitated through the Revenue Online Service (ROS).
The scheme is currently capped at €5m per annum and will be reviewed after 3 years of operation. There was also a facility at the end of Year 1 to monitor and review any unforeseen operational issues that may arise in roll-out of the scheme. During the first year, the Wheel engaged with our members to ensure that any such issues were identified to allow appropriate operational amendments be made to the scheme, if required.
The Wheel’s Director of Finance, Tony Ward will be happy to help members with any queries that they might have, you can contact Tony by email: firstname.lastname@example.org.
The Wheel has been approached by Taxback International who are offering a service to charities to assist them with their claims under the VAT compensation scheme. Any interested charity can contact Taxback International on the below link and, if they feel this service might be of interest, can explore this option with Taxback.
All questions at the webinar and others received since then have been answered and put in an excel document. Download the Q&A document (Excel).
Revenue have also published a contact number for dealing with any queries,
Charities and Sports Exemptions Unit: 01 738 3680.