Budget 2018: Vat Refund Scheme Announced for Charities

The Wheel, Ireland’s largest representative body for charities, has welcomed the announcement by Minister for Finance and Public Reform, Paschal Donohoe, TD that a VAT refund scheme for charities is to be introduced. 
Commenting on the announcement, Ivan Cooper, Director of Public Policy at The Wheel said: “Today’s announcement is a breakthrough for charities who have been campaigning for such a scheme for decades. The Vat rebate provided through this scheme will be reinvested in vital services in areas like housing, health and social care.”
The Charities VAT Compensation Scheme announced today will take effect from 1 January 2018 but will be paid one year in arrears i.e. in 2019 charities will be able to reclaim some element of the VAT costs arising in 2018. Charities will be entitled to a refund of a proportion of their VAT costs based on the level of non-public funding they receive. For example, where a charity’s gross income for 2018 involves 30% funding from State/EU/international organisations and 70% privately sourced income including fundraising, subscriptions and donations, they may claim 70% of their VAT input costs for the year. A capped fund of €5 million will be available to the scheme in 2019. 

The scheme, including the amount provided in the fund, will be subject to review after three years. Claims under the scheme cannot be made until 2019 as it will take some time for Revenue to establish IT and administrative systems. Where the total amount of claims in a given year exceeds the €5 million capped amount, charities will be paid on a pro rata basis, e.g. where the total value of claims by all charities in 2019 amounts to €10 million, each charity will receive 50% of their claim. Qualifying charities must be registered with the Charities Regulator, have tax clearance, and provide a set of audited accounts for the year in which the claim is being submitted. For administrative purposes, claims valued below €500 will not qualify. 

The announcement is a breakthrough for charities and the sector who have been campaigning for such a scheme for decades – indeed there has been a great collaborative effort in the sector for years towards this success. In an effort to support getting the proposal advanced this year,  The Wheel called for a VAT compensation scheme in Budget 2018; raised it at the National Economic Dialogue in June; at September’s pre-Budget meeting with the Minister for Finance; briefed key politicians including Michael Harty T.D. and Minister Katherine Zappone and the main opposition parties . We are happy to have played our part in getting this proposal over the Line!We would also like in particular to recognize the work, over many years, of the former Irish Charities Tax Reform Group (now CII) and particularly their former CEO, Sheila Nordon,  who worked to advance the issue.  

There have been a number of additional developments relating to the community, voluntary and charity sector in today’s budget – and we will be emailing you with a full update next week on how departmental expenditure lines have been affected.  Mr Cooper acknowledged “the clear commitment of Minister Donohue to resolving this long-standing anomaly, following discussions with the Wheel at both the National Economic Dialogue and the recent pre-Budget presentation to him by the Wheel as part of the Community and Voluntary pillar.

“The support of Independent TD, Michael Harty, Independent Ministers Zappone and Naughton and backing of all the main Opposition parties also emphasised the widespread recognition of this measure as being necessary to assist charities in delivering their services,” he said.