VAT Compensation Scheme for Charities

The Wheel was delighted to be involved in the process of developing the operational detail of the VAT compensation scheme, announced in October 2017. In Budget 2022, it was decided that the Scheme was to continue, and it was subsequently enhanced in the 2024 budget.

Background

The VAT Compensation Refund Scheme is designed to compensate charities for the VAT they incur on their inputs in recognition of the work undertaken by the charities sector.The scheme compensates 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 was capped at €5m per annum for claims made relating to 2022 and earlier. Total claims made to Revenue for the first five years of operation (2018 – 2022) totalled between €30 – €40m, thereby resulting in charities obtaining a refund of between 12 and 16% of their individual claims.

Qualifying Income

We ask you to please ensure that you take care not to include public funding as qualifying income. Revenue have identified a common issue of charities incorrectly including public funding in their calculations which creates a backlog of work for Revenue and can delay the payment process. Section 5 of the Revenue Guidelines Manual provides a comprehensive note on qualifying income.

Revenue have also asked us to remind our members that submissions are open between 1 January and 30 June each year, and that early submissions are very much appreciated.

We have developed this very practical template to help charities calculate their claim correctly first time, and we would encourage you to use and indeed share this resource with your charity contacts.

Operations

From an operations perspective the Scheme has worked well with Revenue flagging any issues that have arisen. The Wheel has worked closely with Revenue to disseminate any learnings for improvement of the claims process and Revenue guidance has been updated as the Scheme has progressed.

Further Guidance

The Wheel’s Director of Finance & Operations, Fergal Moran, will be happy to help members with any queries that they might have. You can contact Fergal by email: [email protected].

Revenue Commissions helpline

Revenue have also published a contact number for dealing with any queries,

Charities and Sports Exemptions Unit:  01 738 3680.

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