HMRC have issued Revenue & Customs Brief (“RCB”) 3/2025 VAT treatment of income received from charity fundraising events - GOV.UK, which confirms their view of the VAT exemption which applies to charity fundraising events. This follows HMRC’s defeat at the Upper Tribunal in the Yorkshire Agricultural Society (“The Society”) case ([2025] UKUT 4 (TCC)).
The HMRC RCB fully endorses all aspects of the Upper Tribunal decision, which is welcome news in providing certainty to charities in planning future fundraising activities. There may also be an opportunity to claim refunds of overpaid VAT.
The dispute
The dispute concerned the VAT liability of income generated from an annual event, the Great Yorkshire Show (“The Show”). The fundraising VAT exemption sets out three conditions for the exemption to apply to the supply of goods and services by a charity in connection with an event:
- “That is organised for charitable purposes by a charity or jointly by more than one charity,
- Whose primary purpose is the raising of money, and
- That is promoted as being primarily for the raising of money.”
(Item 1, Group 12, Schedule 9, VAT Act 1994)
Not for Profit
Read more about Not for ProfitRead moreHMRC claimed that conditions b) and c) had not been met by The Society, as
- The sole primary purpose was not raising money; and
- The Show was not promoted as being primarily for raising money.
The Upper Tribunal decision
In terms of Item 1b), The Upper Tribunal held that there could be more than one primary purpose. In this case, the show had two primary purposes, which could not be distinguished, namely raising money and educating the public in line with the charitable aims of the Society.
The Upper Tribunal held that Item 1c) was incompatible with EU law, which had direct effect for the pre Brexit period of this dispute. Item 1c) should be reworded as follows, to ensure its compatibility:
“That is promoted as being for the raising of money.”
A charity must promote the event as a means of raising money, but it does not need to be promoted as the event’s primary purpose.
The HMRC RCB
In terms of “primary purpose”, HMRC state the following:
“If a charity or other qualifying body considers that an event has more than one primary purpose, they must be able to evidence this and provide a clear explanation as to why they cannot be separated in terms of importance.”
“To demonstrate a primary purpose, charities and other qualifying bodies must be able to provide objective documentary evidence that the event was organised as a fundraising event, and not that there was simply an intention to obtain income from the event.”
In terms of the promotion condition, HMRC accept the decision of the Upper Tribunal. The event must be promoted as a fundraising event, but it does not need to be promoted as its primary purpose.
Opportunities
The Upper Tribunal decision and HMRC RCB provides your charity with certainty when planning fundraising events. There is a clear basis for securing VAT exemption on funds raised from these events.
In addition, you can apply the court decision and HMRC guidance to assess whether the charity has overpaid VAT and can claim a refund of VAT for any events in the last four years.
MHA can help you assess compliance with the conditions for VAT exemption and confirm whether you have a valid claim for the recovery of overpaid VAT.
