If a charity fundraising event qualifies for exemption, the charity or its trading subsidiary does not have to account for VAT on income such as entrance fees to the event. Equally, however, it cannot recover the VAT on the related expenses.
To qualify for the exemption the event must be organised by a charity or its trading subsidiary primarily to raise money for the charity. It must not be continuous trading and no more than 15 events of the same kind can be held at a single location in any year. Once the 15-event threshold is breached, none of the events qualify for exemption. The 15-event limit does not apply to fundraising events where the gross takings from all similar events, such as coffee mornings, are no more than £1,000 per week.
The fundraising event must be organised by a charity or a trading subsidiary of a charity and must be promoted as having a charitable purpose. There are strict rules regarding the provision of accommodation, which, in any event, to qualify for exemption must not be provided for more than two nights.
The exemption applies to ticket sales, sponsorship connected to the event and sale of merchandise at the event. Examples of types of events include dances, live performances, film, video or DVD showings, fêtes, fairs and festivals, horticultural shows, exhibitions, jumble and car boot sales, games of skill, firework displays, dinners and auctions.
This is one of the few examples of harmonisation between the VAT and direct tax rules. Note that the exemption is not optional; so if a charity does not want the exemption to apply – perhaps because it can charge VAT on the sponsorship and thereby recover some of its input tax on expenses – then in order not to trigger the exemption it would need intentionally to break one of the requirements referred to above.