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A common burden for charities in Ireland is the VAT they incur in the day-to-day running and managing of their charitable activities. The VAT Compensation Scheme for Charities was introduced in Budget 2018 to alleviate this strain. The VAT Compensation Scheme for Charities aims to partially compensate charities, on a pro-rata basis, for VAT incurred on their overheads.
€5m scheme cap
The VAT Compensation Scheme for Charities fund is capped at €5 million per year for the first three years i.e. 2019 to 2021. The scheme will then be reviewed after the three-year limit, in 2022, and possible revisions to the rules and amount of fund available may be implemented.
How to make a claim?
The application process for the VAT Compensation Scheme for Charities is now open for the financial accounting period ended 31 December 2018.
Charities can submit one claim per year, which must be submitted between 1 January and 30 June relating to the prior financial year’s VAT inputs.
The claims under this fund are not made on a first come first served basis and charities are only entitled to claim a refund representing a portion of their VAT costs based on their level of public funding. For example, if a charity had total funding of €80,000 in a financial year, where €40,000 came from donations and €40,000 from Government funding, the charity would be entitled to make a claim for 50% of the VAT incurred on expenditure on their charitable activities.
Criteria
In order to be eligible for the scheme, a charity must now and at the time the qualifying expenditure was paid:
- be registered with Revenue and hold the Charitable Tax Exemption (have a CHY number);
- be registered with the Charities Regulatory Authority (CRA).
What to do now?
Charitable organisations should ensure their ERP or accounting system is capturing details of VAT incurred that may be reclaimed under the new scheme.
If you have any questions about the VAT Compensation Scheme for Charities and its rules, or wish to seek assistance in submitting a claim, please get in touch with your usual RSM Ireland contact.