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What you need to know about VAT for charities
26 Aug 2025
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Frustratingly for charities, there is a common misconception that they don’t pay tax in the UK. This could not be further from the truth. While charities are exempt from some taxes, they are not automatically exempt from paying Value Added Tax (VAT).
It’s important for charities to know how VAT works so they can understand the reliefs they are entitled to. These reliefs can make significant differences to their finances if done alongside experts who can reduce VAT for charities.
The team at WR Partners is skilled at helping charitable organisations maximise their VAT entitlements, leaving them to focus on doing great work.
Do charities need to register for VAT?
Charities in the UK are not automatically excluded from their VAT obligations and must register for it with HMRC if taxable turnover exceeds the current threshold of £90,000 (as of April 2024).
Even if your turnover falls below this £90,000 figure, it can be worthwhile to register for VAT, as charities can still reclaim VAT on many purchases and operating costs. As well as reclaiming VAT on current purchases, there are also opportunities for retrospective registration. I.e. if your charity met the threshold or generated zero-rated income in previous years, you can earn value-added tax back despite already paying it.
Rules around what qualifies as taxable supplies can be complex, which is why we advise you to seek professional guidance around VAT for charities to avoid missing out or facing penalties.
The VAT relief available to charities
Charities can benefit from several reliefs to help them reduce costs despite the fact that they are not entirely exempt from VAT.
They can ask suppliers to reduce VAT to the ‘reduced rate’ (5%) or the ‘zero rate’ (0%), provided they can give evidence of their charitable status through a Charity Commission registration number or declaration certificate for the supplier.
Goods which can benefit from these rates include:
- Medical and rescue equipment
- Goods designed for people with disabilities
- Certain types of advertising
- Fuel/power used for certain non-business charitable activities
Maximising VAT recovery
VAT can be a significant expense for charities, especially for those organisations that regularly need to make large purchases or who have overhead costs to manage. And, even worse, without the right approach in place, a lot of the VAT that’s incurred remains unrecovered.
A lot of charities find that they can actually recover a lot more VAT than expected, in our experience, when they choose to work with experts who can carefully review how the organisation is structured.
One way to improve the VAT recovery rate is to form a VAT group registration with a trading subsidiary, for example. Also, negotiating a better method to allocate VAT on shared costs with HMRC can lead to a more accurate level of recovery.
These are just two ways to maximise VAT recovery. Unfortunately, so many charities miss these opportunities because they assume VAT registration only applies once they pass the £90,000 threshold.
How a specialist can help reduce VAT for charities
The rules surrounding VAT for charities are nuanced, but with the right team of experts by your side, you can maximise the amount you can recover to the benefit of your charity.
At WR Partners, we help charities across the UK register correctly and reclaim the VAT that is eligible to them.
If you’re concerned you might be missing out on potential savings, speak to our team today.
