Minister Donohoe Announces Commencement of VAT Compensation Scheme for Charities

€5m available in 2019 to finance payments under the scheme

Read reaction from The Wheel below

Minister for Finance and Public Expenditure and Reform, Paschal Donohoe TD, has today (Friday) announced the making of the Value-Added Tax (Refund of Tax) (Charities Compensation Scheme) Order 2018, which was signed into law on 18 December 2018. 

This Order gives effect to the Budget 2018 announcement of a VAT Compensation Scheme for Charities, which will allow charities to reclaim a proportion of their VAT costs based on the level of non-public funding they receive.

A capped fund of €5 million will be available in 2019, to finance payments under the scheme in respect of claims of VAT paid in 2018.

The terms of the VAT Compensation Scheme as outlined in last year’s Budget are contained in the VAT Refund Order.  These include:

  • Charities must be registered with the Charities Regulator, have tax clearance, and be in possession of up to date audited accounts;
  • A claim must be based on the level of privately-sourced income raised by a charity, so that where a charity’s gross income for 2018 involves 30% funding from State/EU/international organisations and 70% from privately sourced income, they can claim 70% of the VAT they paid during the year;
  • Where the total amount of claims in a year exceeds the capped amount, charities will be paid on a pro rata basis, i.e. where the total value of claims is double the capped pool amount, each charity will receive 50% of their claim.

Minister Donohoe said: ‘The VAT Refund Order is the product of significant engagement between officials of my Department and the Revenue Commissioners and the charities sector and I want to thank the sector for its positive contribution to this process’.

The facility to make claims under the scheme will be available on Revenue’s Online Service from January 2019. Guidance on the scheme for charities is available on the Revenue Commissioner’s website at www.revenue.ie.


Charities welcome Ministerial Order bringing new VAT Compensation scheme into effect

Charities Institute Ireland (Cii) and The Wheel have jointly welcomed the signing by the Minister for Finance of the Ministerial Order that brings the VAT Compensation Scheme for Charities into effect. The €5million scheme was announced in Budget 2018, and compensates charities for a proportion of the VAT they incur on expenditure related to independently raised income.

Charities will be able to claim for VAT paid from the 1st January 2018, and to make claims once a year for VAT paid in the previous year. 

In a joint statement welcoming the announcement, Scott Kelley, Interim Chief Executive of Cii and Deirdre Garvey, Chief Executive Officer of The Wheel said: “Irish Charities have worked closely with Department of Finance and Revenue officials on the detailed implementation of the VAT compensation scheme, and we are delighted that today the Minister has formally signed the Order which brings the scheme into effect.” 

Irish charities are major buyers of goods and services in the economy and are liable to VAT on their purchases. The new scheme will return some of that money to charities to enable them to enhance services and provides an incentive to increase their fundraising efforts. 

We expect that many charities will benefit from this new scheme, which represents a major acknowledgement by government of the role and contribution of charities to Irish society. If the total claims exceed the €5 million allocated, charities will be paid on a pro rata basis.  In time, we hope that this scheme can be expanded after the initial three-year period to which the Minister has committed,  Scott Kelley and Deirdre Garvey said.

Full details of the scheme may be accessed on: www.finance.gov.ie/news/latest-news/

For further information please contact

The Wheel - John Gallagher Tel. 087 9369888