Following the Upper Tribunal ruling on the Yorkshire Agricultural Society case, HMRC has broadened the scope of VAT relief for fundraising events. Whilst fundraising still needs to be a ‘primary purpose,’ it no longer needs to be just the ‘primary purpose.’ Where an organisation has two primary purposes that cannot be separated in importance, the exemption can still apply. This is provided that one of those purposes is fundraising, as in the case of the Yorkshire Agricultural Society, where the aims were to fundraise and to educate.
Looking forward, this will provide charities with greater flexibility when planning events. In particular where events may also look to serve other goals of the charity. However, charities should note HMRC’s comments on the primary purpose following the ruling:
“If a charity or other qualifying body considers that an event has more than one primary purpose, they must be able to evidence this and provide a clear explanation as to why they cannot be separated in terms of importance.”
“To demonstrate a primary purpose, charities and other qualifying bodies must be able to provide objective documentary evidence that the event was organised as a fundraising event, and not that there was simply an intention to obtain income from the event.”
The event must still therefore be promoted as a fundraising event. HMRC acknowledge this may not be its sole purpose.
Following the ruling, there may be scope to claim a refund for events held in the last 4 years. Where applicable, charities should apply the court decision. Then review HMRC’s guidance to determine if there have been any overpayments of VAT.
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