Charities pay VAT on most of what they buy, but a defined list of goods and services is zero rated when supplied to a charity that meets the conditions, mainly under Group 15 of Schedule 8 to the VAT Act 1994, and fuel and power can be charged at the 5% reduced rate for qualifying use. To get the relief the charity gives its supplier evidence of charitable status and a written eligibility declaration, kept separate from the order or invoice. The supplier remains responsible for applying the right rate.

Which purchases can a charity buy at the zero rate?

HMRC’s guidance on VAT for charities lists the zero rated categories. The main ones are:

  • advertising, and certain items used to collect donations
  • aids for disabled people, and goods and motor vehicles designed or adapted for disability
  • construction of certain buildings and certain works to protected buildings
  • drugs and chemicals used in medical or veterinary research
  • equipment for making talking books and newspapers
  • lifeboats and associated equipment, including fuel
  • medicines and ingredients for medicines
  • medical, veterinary and scientific equipment, and ambulances
  • rescue equipment and resuscitation training models

The reliefs apply whether or not the charity is registered for VAT. They are not a general exemption: each has its own conditions, and anything outside them is charged at the normal rate. Community amateur sports clubs do not qualify for the same reliefs. How zero rating differs from exemption is explained in zero rated vs exempt supplies.

How does the advertising relief work?

Items 8 to 8C of Group 15 zero rate the supply to a charity of advertising time or space in a medium that communicates with the public, the promulgation of the advertisement, and its design or production, together with closely related goods. The advertisement can be on any subject, including staff recruitment, and need not carry the charity’s name or logo. Television, radio, cinema, billboards, newspapers and digital media all qualify.

The relief has firm limits. It does not cover advertising where the audience is selected by or for the charity, by address, email or telephone number, so direct mail and telesales are excluded. It does not cover anything that creates or contributes to the charity’s own website, even if hosted by someone else, or design work the charity uses to produce its own advertisement. Exhibition stands, distribution services and commemorative items such as pens are outside it. The relief applies to supplies to the charity, including by its own trading subsidiary, but not to supplies made to a trading company.

Under an extra statutory concession, certain printed stationery for appeals, collection boxes and buckets, and low cost lapel stickers and badges given in acknowledgement of donations can also be zero rated. Concessions have no legal force, so the published conditions need to be met exactly.

What are the rules for medical, scientific and rescue equipment?

Notice 701/6 sets six conditions, all of which must be met:

  1. The goods or services are bought by an eligible body, or for donation to one.
  2. They are qualifying goods or services, or the repair and maintenance of qualifying goods.
  3. None of the restrictions on particular eligible bodies applies.
  4. Medical, scientific, computer, video, sterilising, laboratory or refrigeration equipment is for use mainly in medical or veterinary research, training, diagnosis or treatment.
  5. Purchases by an eligible body are paid for from charitable or donated funds.
  6. The purchaser gives the supplier a valid eligibility declaration or sufficient evidence.

Eligible bodies include certain health bodies, not for profit hospitals and research institutions, and certain charitable institutions, such as care establishments and day centres, which should be able to show that 51% or more of those receiving care over an extended period are chronically sick or disabled. Funding is a frequent stumbling block: lottery funding counts as a voluntary contribution, but National Health Service funds are not charitable or donated, and if a non charitable eligible body contributes from its own resources the goods cannot be zero rated. Equipment bought by donors for donation to an eligible body can also be zero rated, with details of the donor and recipient on the declaration. Charities providing first aid or rescue can buy specialist communication, light enhancing and heat detecting equipment at the zero rate.

What about construction, imports and fuel and power?

Construction of buildings intended for use solely for non business purposes, or as a village hall or similar, can be zero rated subject to conditions in Notice 708. Since 1 June 2022 charities must apply the two stage business test when deciding whether a building project qualifies; certificates issued before then remain valid for the period they cover. The certificate for zero rated building work must follow a set format, and HMRC recommends checking entitlement with its Charities team before a project starts because the rules are complex. See what counts as business activity for VAT for the test itself.

Charities do not pay VAT on goods imported from outside the UK that benefit people in need by providing basic necessities, equipment and office materials for running the organisation for their benefit, or goods used or sold at charity events. Qualifying medical equipment can also be imported free of VAT if the declaration is lodged with HMRC at importation.

Fuel and power is charged at 5% where it is for residential accommodation, such as a care home, or for charitable non business activities. Small deliveries automatically qualify: up to 1,000 kilowatt hours of electricity a month or 2,300 litres of gas oil. If less than 60% of the supply is for qualifying use, only that part gets the reduced rate and the rest is charged at 20%. Vehicle fuel is excluded.

What evidence does the supplier need?

The charity must give the supplier evidence that it is a charity, either its Charity Commission registration number or a letter of recognition from HMRC. Scottish and Northern Irish charities must provide the HMRC letter. It must also give a written declaration or certificate confirming eligibility for the specific relief. HMRC publishes example declarations, including in the Notice 701/6 supplement. The declaration should be separate from, or clearly distinguishable from, the order form or invoice, because signing an order should not automatically mean signing a declaration.

The supplier is responsible for applying the correct rate. It should take reasonable steps to check anything it cannot verify itself, record those checks and keep them with the declaration. Where a supplier has done so and acts in good faith on a declaration that proves inaccurate, HMRC will not seek the VAT from the supplier. For the advertising relief, a fresh declaration may not be needed for repeat orders where nothing has changed.

The charity carries real risk too. Under section 62 of the VAT Act 1994, a person who gives an incorrect certificate for zero rated construction or works to protected buildings is liable to a penalty equal to the VAT that should have been charged, unless it has a reasonable excuse.

Does the charity need to be VAT registered?

No. The reliefs depend on the purchaser’s status, not its registration. A charity must register only if its taxable turnover exceeds the £90,000 VAT registration threshold, and it can choose to register below that to reclaim VAT on costs of its taxable activities. A charity whose activities are wholly exempt cannot register. The legal form of the charity, such as a charitable incorporated organisation, does not change these rules.

Can you show how this works in practice?

Illustration only. A registered hospice charity, funded entirely by donations, buys:

Purchase VAT treatment
£5,000 of radio advertising for a fundraising appeal Zero rated advertising, with a declaration to the broadcaster
£2,000 for a mailing to named past donors Standard rated, because the audience is selected by address
£8,000 syringe driver for patient treatment, paid from donations Zero rated under Notice 701/6, with a separate eligibility declaration
£1,500 website redesign Standard rated, because the site is the charity’s own
Electricity for the residential unit 5% reduced rate for qualifying use

What are the common mistakes?

  • Assuming all charity purchases are VAT free. Only the listed reliefs apply; general office costs, IT and professional fees are standard rated.
  • Using the order form as the declaration. The declaration should be a separate document identifying the relief claimed.
  • Buying equipment with NHS or other non charitable funds. The medical equipment relief needs charitable or donated funds.
  • Claiming advertising relief on targeted campaigns. Direct mail, email to selected contacts and the charity’s own website are excluded.
  • Signing construction certificates without checking the business test. An incorrect certificate exposes the charity to a penalty equal to the VAT lost.

For donations made to charities by companies, see company donations to charity.

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Sources

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.