1. What Is The Vat Compensation Scheme?
The Vat Compensation Scheme was announced on the 10th October 2017 as part of the 2018 Budget measures, after a number of years of examining proposals.
As Charities are exempt from Vat under Irish & EU law, Charities do not charge Vat on their services and cannot recover Vat on goods, services and expenses incurred (subject to certain exceptions).
The Vat Compensation Scheme was set up to compensate Charities for the Vat incurred on their purchases & expenses. The scheme came info effect from 1st January 2018. A claim under the Vat Compensation Scheme is done one year in arrears i.e. a claim for the calendar year 2019 will be completed in 2020.
The scheme will be subject to review after 3 years.
2. Is My Charity A Qualifying Charity?
A Charity will qualify for Vat compensation if it is;
- Registered with the Charities Regulator,
- Registered with Revenue and hold a Charitable Tax Exemption (CHY),
- Has Tax Clearance,
- Overall Vat claim is over €500.
3. My Charity Does Not Have A CHY Number. What Should I Do?
Your Charity may be eligible for a Charitable Tax Exemption and can apply to the Revenue to gain a CHY number. If your Charity does not currently have a CHY number, then you will be unable to claim for Vat Compensation this year. However, should you receive a CHY for your Charity, you may be eligible for the scheme next year.
If you need assistance in this process, please do not hesitate to Contact Us.
4. How Much Compensation Will My Charity Receive?
The Vat compensation entitlement will depend on a number of factors;
- The amount of Vat incurred & paid on goods, services and various expenditures,
- The level of non-public funding the Charity receives, and
- The overall level of claims submitted by each Charity nationwide.
Below are some scenario’s to illustrate the above. However, please note;
Illustrations are as per the latest Revenue guidelines, and are only provided for ease of understanding.
‘Private Income’ refers to all non-governmental income (direct and indirect). Private Income can include donations, fundraising, corporate donations etc.
‘Total Claims’ refers to the full amount of Vat compensation claimed by Charities nationwide for the given year. This will not be known by an agent or Charity when applying for the Vat compensation of an individual Charity.
‘Potential Compensation’ refers to the amount that the Charity could receive within the parameters of the scenario.
This information should not be applied to your Charities case purely based on the scenario. Please contact us for further information.
Eire HFC – Total Vat incurred for 2018 €5,000
Income – Public €10,000 / Private €30,000 (Percentage of Vat Compensation allowable = 75%)
Eire HFC – Total claim €3,750
Total Claims – €5 million
=> Eire HFC potential Vat compensation €3,750
Eire Meals on Wheels – Total Vat incurred for 2018 €2,000
Income – Public €20,000 / Private €5,000 (Percentage of Vat Compensation allowable = 20%)
Eire Meals on Wheels – Total Claim €400
Total Claims – €20 million
=> Eire Meals On Wheels potential Vat compensation € nil.
No compensation allowable as claim is below €500 qualifying amount.
Eire Community Centre – Total Vat incurred for 2018 €15,000
Income – Public €40,000 / Private €60,000 (Percentage of Vat Compensation allowable = 60%)
Eire Community Centre – Total Claim €9,000
Total Claims – €50 million
=> Eire Community Centre potential Vat compensation €900
Total claims of €50 million, therefore claims paid on pro-rata basis.
5. What Expenditures Can My Charity Not Claim Vat On?
Vat cannot be claimed on;
- Non-Charity related expenses,
- Vat that is subject to an existing Vat refund order,
- Vat on expenditures that have not been paid by 31st December.
- Vat incurred that is otherwise deductible.
6. My Charities Accounting System Is Not Accounting For Vat, What Should I Do?
This is ok, as Vat compensation calculations should be done outside of your general bookkeeping / accounting system for Charities that are not Vat registered (which is the majority, subject to certain exceptions).
charityvatback.ie can help you with this. Contact us for more information.
7. My Charity Is Not Based In Cork, Can You Still Help Me?
Yes, charityvatback.ie can still assist your Charity. Please feel free to Contact Us to find out more.
8. Does Charityvatback.ie Provide Other Services For Charities?
Yes charityvatback.ie can assist you & your Charity with other services. Feel free to Contact Us to find out more.
9. I Think My Charity Qualifies, What Should I Do Next?
If you are unsure whether you qualify, or how much you think you can claim, please do not hesitate to contact us for a free consultation.
Following this, we can apply our ‘3 A’s’ to your Charity’s situation (Analyse, Apply & Attain) and potentially secure additional funding for your organisation.
If successful, you & your Charity can continue to do what you do best => Helping Others.
10. What Happened With The First Year Of The Scheme?
2018 was the first year of the scheme, with all claims for Vat Compensation being filed by the 30th June 2019.
There were over 1,100 claims for Vat Compensation by relevant Charities, with total claims of almost €40 million. As the scheme had a cap of €5 million, each Charity received roughly 12.5% of their claim.
As the scheme was over-subscribed , a Charity with a claim of €10,000 for 2018 would have received €1,250.
Submissions have been made to Government & Revenue to increase the fund available as a result of the over-subscription in 2018. At present, there is no further update as to whether the fund available will increase.
Please contact us if you require any further information.