Charities and some other non- profit making organisations, such as certain membership, sporting, and cultural organisations ** are able to benefit from the exemption for fundraising activities. The exemption covers supplies of goods or services made by a charity or qualifying body in connection with an event organised by the charity, qualifying body, or a combination of one or more charities and a qualifying body. The event needs to be clearly organised and promoted to raise money for the benefit of the charity or qualifying body. The number of events covered by the exemption is limited to 15 events of the same kind at the same location in a financial year to prevent distortion of competition with other organisations holding similar events.
Where the exemption applies, it covers all the income for supplies of goods and services in connection with an event, for example:
- all admission charges
- the sale of commemorative brochures (may be zero-rated)
- the sale of advertising space in those brochures (may be zero-rated)
- other items sold by the charity such as t-shirts, non-donated auctioned goods etc. (where items are normally supplied zero-rated such as children’s t-shirts, then zero rating rather than exemption can be applied)
- sponsorship payments directly connected with a qualifying event
Unfortunately, the exemption does not apply to events organised by an individual or other non-qualifying bodies, or even to events jointly organised by the non-qualifying body and a charity.
As your client is not a qualifying body, the exemption cannot apply to the income received in relation to the festival. The partnership of the client and his friends will be required to register for VAT.
A potential way forward for future events would be to organise the event as the disclosed agent for a charity or qualifying body; however it is important to note where an agent retains any part of the gross receipts, HMRC will see this as consideration for agency services, and subject to VAT.
The effective date of registration will need to be established based on calculating turnover on a rolling 12 months basis, not looking at turnover for each event in isolation. For example, this may mean that the gate admissions from 2017 when added to the pre-sales, advertising and sponsorship for 2018 could breach the threshold. In addition, on the basis that the festival attendance is increasing each year, unless a decision was made for the event not to continue in its current organisational format, it is unlikely that a case could be made for exception from registration.
**HMRC have produced some useful detailed online guidance on this matter: Fundraising events: exemption for charities and other qualifying bodies https://www.gov.uk/government/publications/charity-fundraising-events-exemptions/fundraising-events-exemption-for-charities-and-other-qualifying-bodies
If you would like to discuss how the fundraising exemption or the application of the rules around VAT registration will affect your clients, please call the VAT advice Line
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If you have a VAT query why not contact the VAT Advice Line on 0844 892 2470 to discuss the implications. Our team of experts have a wealth of experience and can also provide a written consultancy service at competitive rates.
