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Five things to watch out for when making your charity VAT claim

he deadline for the VAT Compensation Scheme for Charities is right around the corner. Liz Hughes outlines some stumbling blocks to watch out for when making a claim.

The deadline – 30 June – for submissions to the VAT Compensation Scheme for Charities is fast approaching. The scheme is designed to reduce the tax burden on the charity sector and is a strong indication of the government’s acknowledgement of the charity sector’s positive role in Irish society.

A significant amount of time and effort from the sector went into securing the scheme. While the cap currently sits at €5 million per annum, the scheme will be reviewed after three years. There is potential to increase the fund should it be consistently oversubscribed, and the charity sector is working hard to ensure that this opportunity does not go to waste.

For example, Charities Institute Ireland (Cii) has, over the last two months, undertaken a campaign to inform its members on the details of the scheme. Cii is encouraging all members to submit their claims to the scheme in order for the €5 million cap to be exceeded. And, while the window for early submission has passed, any accountants who have charity clients must submit a claim before the deadline of 30 June.

Experiences with the scheme

As part of the campaign regarding the VAT Scheme, Cii surveyed members on their experiences of the scheme to date. The claims themselves were rather diverse – for example, they ranged anywhere from €15,000 to €190,000 (average €61,000). Everyone’s experience will be different. However, if you are looking to avail of the scheme, it would be good to be aware of some of the following issues:

The time taken to prepare claims ranged from two days to two weeks.Many respondents indicated that they had to change their internal systems to capture the required data.There is no official template for the written declaration from an organisation’s CEO/CFO declaring the validity of the claim. (However, the Cii has solved that problem for you here.)Revenue has made a distinction between education and training income. Education income is not regarded as qualifying income whereas training income is considered such.Retail income via a website is not regarded as qualifying income.

Due to the differing nature and size of various charities, it is unsurprising that there is a large divergence in experiences, but the feedback from applicants has been positive regarding both the process and Revenue’s assistance with queries. As with all new schemes, teething problems are to be expected. To assist with this, Revenue has indicated there will be a facility at the end of year one to monitor and review any unforeseen operational issues that may arise in the roll-out.

With these issues ironed out, there is hope to see the scheme go from strength to strength in the coming years, that the effort from the sector to secure the scheme will be well-rewarded, and that the scheme expands in the future.

Liz Hughes is the CEO of Charities Institute Ireland.

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