Charity Fundraising Events Tax Implications

In our latest blog, our Head of Charities, Jenny Simpson, looks at the potential tax implications of fundraising events;

It’s a common misconception that charities don’t pay taxes. Whilst there are generous tax exemptions for charities, if they operate out with the available exemptions they can be subject to tax on any profits made.

Fundraising events are one area where activities can become taxable almost by accident as the rules are quite complicated but if you stick to the rules, they can be exempt from both tax and VAT.

The basic rule is that fundraising events are exempt from tax and VAT as long as;

  • You hold no more than 15 events of any one kind, in any one location per year; and
  • The event is (primarily) for the purpose of raising funds; and
  • You have a reasonable expectation of the event generating a surplus; and
  • The event does not compete directly with commercial suppliers.

Care is needed because if you have 16 events then all of them become taxable and VATable, not just the sixteenth one.

The exemption covers ticket sales, commercial sponsorship of the event and any related merchandise sales but not necessarily wider supplies made by the charity which are sold at the event.

The VAT exemption also extends to an event run by a wholly-owned subsidiary as long as the proceeds are paid up to the parent charity, and of course, they can be sheltered from tax within the subsidiary by use of the gift aid scheme.

With careful planning of when and where events are held, there should be no risk of losing the tax exemptions available on fundraising events.

This blog is intended as a general overview and discussion of the subjects dealt with. It is not intended to be, and should not be used as a substitute for taking professional advice in any specific situation. Wylie & Bisset LLP (and its subsidiary Wylie & Bisset (Audit) Limited) will accept no responsibility for any actions taken or not taken on the basis of this blog. If you would like further advice or would like to discuss any of the issues raised in the blog then please get in touch with your regular Wylie & Bisset contact or use the contact form on our website.

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