The Short Answer

Mostly, yes. It's a common assumption that charities don't pay VAT, but there's no blanket exemption. A charity buying office supplies, paying for services, or purchasing equipment generally pays VAT on those purchases like any other organisation. What charities do get is a set of specific reliefs on particular types of purchase - and those reliefs can be significant.

Charity VAT is genuinely one of the more complex corners of the VAT system, with rules that depend on the charity's activities, its VAT registration status and what's being bought. This guide gives the general picture - for a specific charity's situation, HMRC's charity VAT guidance or a specialist accountant is the right place to check.

Where Charities Get VAT Relief

The reliefs apply to specific categories of purchase, and usually require the charity to give the supplier a declaration confirming it qualifies. The commonly-used ones include:

  • Fuel and power for non-business use - charged at the reduced 5% rate rather than 20%. And from 1 October 2026, VAT on electricity for qualifying non-business charity use drops to 0% under a temporary measure, in line with the domestic electricity cut.
  • Advertising - most advertising bought by a charity can be zero-rated, whether it's print, online, or broadcast.
  • Certain medical and scientific equipment - can be zero-rated when bought by eligible bodies for qualifying purposes.
  • Goods and building work for disabled people - specific reliefs apply to aids, equipment and adaptations.
  • Construction of certain charitable buildings - some new buildings used for charitable purposes can be zero-rated.
Think of it as targeted discounts rather than a blanket pass. A charity buying a computer pays 20% VAT like anyone else. The same charity buying advertising for a fundraising campaign can usually have it zero-rated. It's the type of purchase that matters, not just who's buying it.

Do Charities Charge VAT?

This is the other side of the question. Charities can be VAT-registered, and if they are, they charge VAT on their taxable sales just like a business - for example, a charity that runs a cafe or sells merchandise. Whether a charity needs to register depends on its taxable turnover, the same threshold rules that apply to businesses.

Many charity activities are exempt or outside the scope of VAT altogether - donations, grants, and certain welfare and educational services, for instance. A charity's VAT position often involves a mix of taxable, exempt and non-business activity, which is exactly why it gets complicated.

Common Mistakes

  • Assuming charities are exempt from all VAT. They're not - the reliefs are specific.
  • Not claiming reliefs the charity is entitled to. Suppliers won't apply the relief unless the charity provides the right declaration. Many charities overpay simply by not asking.
  • Treating donations as VATable sales. Genuine donations with nothing given in return are outside the scope of VAT.
  • Applying a relief to the wrong purchase. The fuel and power relief only covers non-business use, for example - a charity's trading cafe doesn't qualify.

Invoicing and Receipts for Charities

If you're a business supplying a charity and applying a relief, the invoice should reflect the correct rate for that item. The Invoice Generator lets you set the VAT rate per invoice, and the VAT Calculator works out figures at 20%, 5% or 0% for any amount. If you're a charity issuing receipts for payments, the Receipt Generator handles the VAT breakdown correctly.

Frequently Asked Questions

Are charities exempt from VAT?

Not as a general rule. Charities pay VAT on most purchases, with specific reliefs available on certain categories like advertising, fuel and power for non-business use, and some equipment.

Can a charity reclaim VAT?

Only if it's VAT-registered, and only on costs relating to its taxable business activities. VAT on costs relating to non-business or exempt activities generally can't be reclaimed, which is a major reason the specific reliefs matter so much.

Do charities pay VAT on electricity?

For non-business use, charities pay the reduced 5% rate rather than 20% - and from 1 October 2026, qualifying non-business electricity use drops to 0% under a temporary measure. Business use, such as a charity shop, is standard-rated.

Does a charity need a VAT number?

Only if it's VAT-registered. Many charities aren't, either because their taxable turnover is below the threshold or because their activities are mostly exempt or non-business.

How does a charity claim VAT relief on a purchase?

Usually by giving the supplier a written declaration confirming the charity qualifies and the purchase is for an eligible purpose. The supplier then applies the correct rate on the invoice. HMRC provides standard wording for these declarations.

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