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€5m fund means charities can claim VAT relief for the first time from January

Under the scheme, charities will receive a refund of their VAT costs based on the level of non-public funding they receive.

Image: Shutterstock/mariakraynova

THE GOVERNMENT HAS confirmed that there will be a new tax relief scheme made available to charities who want to apply for exemptions.

It means that charities who apply for the exemption could pay less tax, which would lead to more money raised by charities through fundraising going to those causes.

Responding to a question from Fianna Fáil’s finance spokesperson Michael McGrath, the Minister for Finance Paschal Donohoe said:

“I am advised that the Revenue Commissioners have developed systems to enable charities submit claims and to support processing and payment of claims. The facility to make claims under the scheme will be available on ROS from January 2019.”

The fund would mean that charities will receive a refund of their VAT costs based on the level of non-public funding they receive.

The scheme will see the compensation paid one year in arrears, so the VAT costs that charities have incurred in 2018 are applicable.

Donohoe said that charities would be entitled to a refund of a proportion of their VAT costs based on the level of non-public funding they receive.

For example, where a charity’s gross income for 2018 involves 30% funding from State/EU/international organisations and 70% from privately sourced income, they can claim 70% of their VAT input costs for the year.
Where the total amount of claims in a year exceeds the capped amount, charities will be paid on a pro rata basis, i.e. where the total value of claims is double the capped pool amount, each charity will receive 50% of their claim.

The Revenue Commissioners are expected to issue detailed guidance about the operation of the scheme once the Ministerial Order giving effect to the scheme is signed into law later this month. 

“Fianna Fáil has been calling for the establishment of a VAT compensation scheme for charities for quite some time,” McGrath said, “and was to the fore in securing the inclusion of the scheme in the Budget over a year ago.”

“While the €5m fund available for VAT refunds is modest, it represents an important start and Fianna Fáil would support the expansion of this scheme in the years ahead.”

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