My VIP Tax Team VAT question of the week: VAT implications of Ukraine fund-raising event

The VAT issues arising from this type of situation bring to mind the old adage “No good deed goes unpunished”.

It is important to make the distinction between a supply which exempt from VAT and one which is still taxable, but where the government of the day decide to donate the VAT receipts to charity.

As recently reported in Accountancy Daily, it is the latter which is happening to the VAT collected on the ITV concert ticket sales.
“The Treasury has confirmed that the amount collected in VAT from ticket sales for the Concert for Ukraine, which is to be hosted by ITV in Birmingham’s Resorts World Arena next Tuesday, is to be donated to the Disasters Emergency Committee’s Ukraine Humanitarian Appeal.” (Accountancy Daily 25th March 2022).

Exemption from VAT can apply to fund-raising events held by charities and certain non-profit making bodies. Further detail on this exemption can be found at https://www.gov.uk/government/publications/charity-fundraising-events-exemptions/fundraising-events-exemption-for-charities-and-other-qualifying-bodies.

Unfortunately, in your client’s case the VAT on any ticket sales to her event will still need to be remitted to HMRC despite the fact she is kindly donating the proceeds to charity. On the plus side any input tax incurred in staging the event will be recoverable in the normal way. Any freely given donations which are collected over and above the ticket price will remain outside the scope of VAT.

As a final point, gala events often incorporate a charity auction with local businesses and attendees donating goods. There is provision for zero-rating in certain specified circumstances. It is quite an esoteric relief and anyone considering this would be advised to check the rules in detail, but broadly speaking, auctions run by anybody other than a charity or qualifying subsidiary can use the relief as long as it acts as a ‘profits-to-charity‘ person in respect selling goods donated to it (VATA 1994, Sch. 8, Grp. 15, item 1A and Note (1E)).

A profits-to-charity person is a taxable person who, in respect of any goods has agreed in writing (whether or not contained in a deed) to transfer its profits from the supply of hired, sold or exported goods to a charity or such profits are otherwise payable to a charity (VATA 1994, Sch. 8, Grp. 15, Note (1E).

The treatment of donated services is not explained anywhere in HMRC’s guidance. It is likely the service e.g., beauty treatment/ cinema tickets, would not be donated to the event company, but would in fact be freely given away directly to the successful bidder by the donor. In which case the VAT implications are minimal other than potentially an input tax restriction for the donor on any directly associated costs. But, as ever the actual arrangements would need confirming.

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