Charity Tax Update – September 2020

23rd September 2020

Our charity tax advisor outlines the latest updates impacting charities, including VAT clarifications for issues emerging during Covid-19, and current Gift Aid developments.


  • Some charities have been renting premises to other organisations (such as the NHS) to help during the pandemic.  HMRC have said that this won’t affect any VAT partial exemptions or count as a change of use as long as the charity isn’t charging more than cost
    • HMRC are looking on a case by case basis, but that is their general stance
    • When renting to NHS, HMRC are generally saying there will be no impact on business/non business apportionment
  • HMRC have made a decision on DfID (now FCDO) grants – they are outside the scope of VAT
    • Grants from the Irish equivalent of FCDO are VATable
  • Any clients that were able to use the Eat Out to Help Out Scheme should note – VAT is due on the full cost of the meal
  • HMRC are discussing a proposed reform of VAT group registration
    • They are looking to make it mandatory to be part of a VAT group if one is fully owned by the other, rather than being able to choose
    • The Charity Tax Group is raising a formal objection, which will propose an exemption for charities
  • The guidance on the new zero rating of e-publications is not very clear, and still seems to rely on the physical characteristics of a publication if it were in printed form.  This is causing issues with things such as newsletters, especially where it has never been printed so there is no evidence of what the physical product would look like/how it would behave.

Gift Aid

  • There is an ongoing Gift Aid Emergency Relief Campaign being proposed by a coalition of charities
    • The proposal is that gift aid be increase from 20% to 25% for 2 years
    • Based on the fact that the government seem to like matched giving schemes (ie, rather than separate grants for charities, they only grant the funds when the general public make donations)
    • Charities can go to the Gift Aid Emergency Relief Campaign website for information on how to get involved and add their support
  • There has been a meeting between HMRC, British Heart Foundation and Cancer Research UK to discuss the issues around claiming gift aid on Facebook Donate funds
    • HMRC believe that it should be considered on a case by case basis
    • Generally, they consider that the raw data provided by Facebook is not sufficient to make a claim
    • They would allow it where a charity has taken steps to reconcile the funds received with the information provided on donors, but the onus would be on the charity to prove that any claim made was not reckless and they reasonably believe that it would pass an audit/inspection
    • Claims of FB Donate items will be paid, but may be questioned if the charity is later investigated by HMRC
    • HMRC will produce guidance in due course, but it doesn’t seem to be a priority
    • Charities are advised to make Facebook Donate claims separately to any other gift aid claims
  • Gift Aid Awareness Day
    • Gift Aid Awareness Day is on 8th October 2020
    • On the day, there will be a series of webinars by the Charity Tax Group available for charities to attend, including one with HMRC where they will be taking questions
  • There is a proposal to extend the period for subsidiaries to gift aid their profits to parent charities beyond 9 months in light of cashflow issues due to Covid
  • Trading grants are considered to be taxable income, so clients need to be aware that they may generate a tax charge
    • There is currently no clear advice on when to recognise them (eg, on receipt, or over the period affected, etc).

Please contact our Tax Team for further guidance on any of the above issues.

About the Author

Liv Burrell


Liv Burrell

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