|HMRC Reference:Notice 701/58 (March 2002)||View Change History|
This notice cancels and replaces Notice 701/58 (August 2001). Details of any changes to the previous version can be found in paragraph 1.2 of this notice.
701/10 Zero-rating of Books etc.
Charities and businesses which make supplies to charities. In particular this notice should be read by:
This notice explains which advertising services and closely related goods are zero-rated when supplied to a charity. It also explains which goods for the collection of donations can be zero-rated by concession.
The notice has been restructured to improve readability, but the technical content has not changed from the August 2001 edition.
Following the application of VAT to newspaper advertising in 1984, charities successfully campaigned for the retention of a zero rate for certain advertisements. Over the years the scope of the relief widened to include broadcasting of advertisements as well as printed media advertisements. Concessionary zero-rating of certain types of printed matter has also been allowed, and the supplies covered have changed over time.
Following the Review of Charity Taxation in 1997-1999 the scope of the zero rate for advertising was widened. The scope of the concessionary zero rate was also extended and formalised into an Extra Statutory Concession (ESC).
This notice gives the position with effect from 1 April 2000.
The full text of the relevant law is reproduced in Section 11. The ESC is reproduced at Section 12.
The law and guidance on the zero-rating for advertising prior to 1 April 2000 can be found in Notice 701/1/95 Charities (January 1995 edition) paragraphs 16(A) to 16(E), as amended by Update 1.
Any charity can benefit provided the supply is made by a third party, including its separately VAT registered trading subsidiary. However the relief is not available for supplies to trading companies.
VAT registered trading companies are still entitled to reclaim the VAT incurred on business expenses in the normal way.
Bodies in England and Wales have charitable status when they are either registered, excepted or exempted from registration with the Charity Commission, or bodies anywhere in the United Kingdom which are treated by HM Revenue & Customs as charitable. Not all non-profit making organisations are charities. The term ‘charity’ has no precise definition in any law. Its scope has been determined by case law.
You therefore need to establish whether your organisation is a charity using the following guidelines:
There is no distinction for VAT purposes between those charities registered with the Charity Commission and those that are not. However, unregistered charities claiming VAT relief may need to demonstrate that they have “charitable status”. This may be achieved from their written constitution or by the recognition of their charitable status by HM Revenue & Customs.
The relief covers all types of advertisements on any subject, including staff recruitment. The name or logo of the charity does not need to be included for relief to be allowed. However charities are expected to only place advertisements which comply with their charitable objects. This relief does not override charity law or the need to comply with the British Codes of Advertising or any other relevant regulations.
Any medium which communicates with the public. This includes all the conventional advertising media such as television, cinema, billboards, the sides of vehicles, newspapers and printed publications. The important factor is whether the advertisement is placed on someone else’s time or space. If it is not there will be no scope for zero-rating.
If space is sold to a charity for advertising on other items, such as beer mats, calendars, or the reverse of till rolls, this will also be covered by the zero rate. The sale of the items themselves will not be VAT free, unless they qualify for other reliefs for example as books or children’s clothing.
It means the general public - which can be widely interpreted to include businesses and small groups.
This includes general groups such as:
It does not include selected individuals or groups.
These are people who are:
Both are excluded from the relief because they are not a supply of advertising time or space but are marketing and advertising addressed to selected individuals or groups. Direct mail includes that sent by post, fax or electronically.
However, individual elements of a postal package can still be zero-rated under the concession for appeal letters and envelopes (see Section 6) or because they are, for example, brochures or leaflets. For details on zero-rating of printed matter (including the ‘package test’ concession) please refer to Notice 701/10 Zero-rating of Books etc.
Suppliers can apply the package test for printed matter to charities’ direct mailing materials. You must read paragraph 6.4 of this notice for further details.
See Notice 700/24 Postage and delivery charges for details of how to decide the liability of goods that are delivered.
Information, whether or not in the form of advertising, placed in, on or through a charity’s own Internet site, does not qualify for zero-rating. This is because it is not a supply of someone else’s time or space whether or not the website is owned, rented or loaned to the charity. Since the information on the website is excluded from the relief, it follows that the associated design costs are also excluded.
However, an advertisement placed on a third party’s Internet site does qualify for zero-rating.
Any method that is not the supply of someone else’s advertising time or space, or is in the form of general marketing and promotion. The following are excluded:
Provided it is intended that the advertisement will be placed in purchased or donated advertising time or space, the supply of design or production of the advertisement will qualify for relief. This includes the design of a poster or the filming or recording of an advertisement to be broadcast.
Goods closely related to the design and production, for example:
No, because this is not a supply to the charity. Therefore, it is not possible for charities to purchase the equipment and raw materials they use in creating these advertisements VAT free.
When a charity uses an advertising agency instead of having a contract with the suppliers of advertising or printing, the VAT liability depends on whether the agency is acting as a principal or an agent. The normal VAT rules for agent/principal agreements will apply.
You should see Notice 700 The VAT Guide for further guidance, but briefly this means that:
To some extent, yes. It must first be determined whether a proposed advertisement is intended to be supplied in a way which will qualify for zero-rating. If it is, the preceding design and production work, when supplied to a charity, will also be zero-rated.
No. Provided it was clearly the charity’s intention to use the services for an advertisement which would have qualified for relief, it will not be required to pay the tax in the event of the work being wasted.
When a charity knows that a proportion of their purchases, such as posters or artwork for magazine advertisements, are going to be used in public places as well as in-house (for example in the charity’s own magazine or shop window), this should be reflected in the declaration given to the supplier. The VAT liability should be split accordingly.
These are formal, published concessions but they have no legal force.
The following items can be zero-rated under the ESC when supplied to a charity:
This relief does not cover general stationary supplied to charities.
Some religious organisations, and other charities, ask “members” to donate money on a regular basis. The people donating the money are given a series of envelopes, known as stewardship envelopes, which they use for their monthly or weekly giving. Stewardship envelopes that are clearly for use in a planned giving scheme and are printed with at least the name of the place of worship or charity can be zero-rated.
Money collecting envelopes that have been especially printed for a charity, making it known that they are donation envelopes, but leaving a space for completion of the individual places of worship, or charity branches, also qualify. However, plain envelopes bearing only a symbol (such as a cross printed on them), and available from retailers as general stationery, do not qualify.
An appeal letter is a single or multiple sheet letter pre-printed with the description of the cause. The primary purpose of the letter must be a request for donations. It must be a letter not just a form to fill in and return with a donation.
It does not matter whether the letter has the individual addressees’ details included when supplied to the charity. A letter without an individual’s particulars might qualify for zero-rating as a leaflet, see Notice 701/10 Zero-rating of Books etc., in which case the purpose of the letter would be unimportant.
The package test for determining the VAT liability of a mixed supply of printed items (such as items for a mail shot) is a separate concession described in Notice 701/10 Zero-rating of Books etc.
With effect from 1 August 2003 the package test concession has been extended so that some of the charity stationery zero-rated under the ESC at Section 12 will also count as zero-rated for the package test. Please see Notice 701/10 Zero-rating of Books etc. for details.
No. If the test does not result in zero-rating of the package, a charity will still be able to claim zero-rating on any item which qualifies for relief either under Schedule 8, Group 3 or the ESC.
All types of boxes and receptacles used for collecting money qualify providing they comply with all the following conditions:
They must …
be secure, that is, capable of being sealed, for example by tamper evident sticker, tape or lock;
clearly be charity collecting boxes for a named charity; and
either bear the name of the charity, for example by indelible printing or embossing or having raised letters, or allow for the charity name to be added later.
Some examples are:
These boxes may be hand held, floor standing, wall mounted or for placing on a tabletop or shop counter.
Boxes of greater value, such as those made of precious metal, are not zero-rated.
General purpose buckets of the kind available from hardware stores are not covered by the concession.
However the following will qualify for relief:
Elaborate receptacles which have an additional purpose, such as gaming or quiz machines, or have some form of mechanical entertainment do not come within the concession.
However, receptacles where, for example, a simple balance mechanism moves the money from one level to another or the weight of a coin causes it to roll helter-skelter fashion into the collecting area are included in the relief.
No. Receptacles that have another purpose while also having a coin slot included, such as wishing wells, fonts, furniture, fixtures and fittings do not qualify. However, a simple collecting box fixed to any of these items would still qualify.
Only lapel stickers, emblems and badges which are to be given free as an acknowledgement to donors of money, have no intrinsic value and are low cost to the charity will qualify.
The relief is restricted to small items designed to be worn on clothing, of a kind that were traditionally attached to the lapel. Included are paper stickers, ribbons, artificial flowers (if these are used as a symbol of the charity) and metal pins and badges.
Large items for decorating buildings, vehicles, monuments etc are not eligible for relief even if these are just bigger versions of a lapel badge.
Emblems or badges given in return for any non-specified donation or a suggested donation of up to £1. In practice this would mean that the cost to the charity would be considerably less than £1 per unit.
No. Although relief will apply if a charity suggests a donation of £1. If lapel emblems or attachments are offered for a fixed price, even if this is only £1 or less, they do not qualify for relief because the emblems are not given away freely.
Equipment for manufacturing badges is not included in the relief. However if a charity buys identifiable constituent parts, which it will assemble into badges in-house, these come within the concession.
Not under this concession. The normal VAT liability will apply.
There is no relief for the containers. However if the container is merely normal packaging for the lapel attachments then these and their container are a single zero-rated supply of lapel attachments. The more substantial containers, such as those with a strap to hang around the neck, are items in their own right and cannot be included in the relief. The supply of an empty container is also standard-rated.
Where a cardboard collecting receptacle is incorporated in a cardboard tray that holds lapel attachments, and it is supplied as a single item (often as a flat pack) there is a single supply for VAT purposes and normal rules apply. Providing the main purpose of the goods can be seen as the collecting receptacle then the whole supply can be zero-rated.
No. The reliefs described in this notice are not be confused with those contained in VAT Notice 701/10 Zero-rating of Books etc. Some goods such as books and leaflets will be zero-rated to charities under the relief for printed matter as they are when supplied to all other customers.
Charities may also find it useful to read Notice 701/1 Charities.
When a charity claims any of the special zero rate reliefs which are not generally available to all customers, suppliers must be sure that all the relevant conditions for relief are met. It is recommended that a charity gives its supplier a declaration that the specific conditions for the claimed relief are fulfilled.
Usually but not always. The current law should make it easier for printers, publishers, broadcasters and similar suppliers to judge whether their supplies to charities will be zero-rated. Suppliers will, however, always need evidence that the supply was made to a charity.
An example of where a declaration may not be necessary is when a charity requests repeat orders, has made a declaration for the first one and the information contained in that declaration has not changed.
It is the supplier’s responsibility to ensure that the correct VAT rate is applied. He must take reasonable steps to check with the charity any condition which he cannot verify for himself. Any additional verifications carried out should be recorded and kept with the declaration of eligibility.
If a supplier has taken reasonable steps to check the validity of a declaration but fails to identify an inaccuracy and in good faith makes the supplies concerned at the zero-rate, Customs will not seek to recover the tax due from the supplier. It is therefore important that suppliers carefully check declarations received. (See the ESC on incorrect customer declarations in Notice 48 - Extra-statutory concessions.)
A charity must give its supplier evidence that it is a charity.
For lapel emblems etc. it will be necessary to declare that they comply with the use criteria of the concession. When asked for further evidence the charity must be able and willing to give it before VAT relief can be given.
Shown below is a suggested form of declaration which you may copy and use if you wish. It is strongly recommended that suppliers complete Part 2 of this form. However, other types of declaration whether in paper form, faxed or electronic that contains sufficient verifiable information to accurately identify the customer are acceptable to Customs.
CHARITY ADVERTISING Request for Zero-Rating
PART 1 - to be completed by the charity
PART 2 - for use by the supplier
I have read the guidance in Customs and Excise VAT Notice 701/58 and agree that the goods/services described come within the category indicated.
...............................................................…………………… (Signature and date)
This certificate should be retained by the supplier for production to his VAT officer.
NOTES (for example any steps taken to verify the declared particulars)
NOTE: It the supplier’s responsibility to ensure that the goods or services supplied are eligible before zero-rating them.
(referred to in paragraph 1.4)
SCHEDULE 8 - ZERO-RATING: GROUP 15 - CHARITIES ETC.
(8) The supply to a charity of a right to promulgate an advertisement by means of a medium of communication with the public.
(8A) A supply to a charity that consists in the promulgation of an advertisement by means of such a medium.
(8B) The supply to a charity of services of design or production of an advertisement that is, or was intended to be, promulgated by means of such a medium.
(8C) The supply to a charity of goods closely related to a supply within item 8B.
(10A) Neither of items 8 and 8A includes a supply where any of the members of the public (whether individuals or other persons) who are reached through the medium are selected by or on behalf of the charity.
For this purpose “selected” includes selected by address (whether postal address or telephone number, e-mail address or other address for electronic communications purposes) or at random.
(10B) None of items 8 to 8C includes a supply used to create, or contribute to, a website that is the charity’s own.
For this purpose a website is a charity’s own even though hosted by another person.
(10C) Neither of items 8B and 8C includes a supply to a charity that is used directly by the charity to design or produce an advertisement.
(referred to in paragraph 1.4)
VAT: Zero-rating of supplies of certain goods used in connection with collection of monetary donations
(1) This concession applies to supplies to a charity of the following goods:
(a) lapel stickers or attachments designed to be worn on the lapel, which are of no intrinsic value, low cost to the charity and are given as a token in acknowledgement of a donation;
(b) component parts of items described in (a) above when supplied for self assembly;
(c) any form of receptacle which -
(i) is manufactured specifically for the purpose of collecting donated money; and
(ii) is used solely for collecting money for charity; and
(iii) is, or will be, clearly marked as collecting for a named charity; and
(iv) can be secured by lock or tamper evident seal.
(d) bucket lids, designed to fit buckets and provide a secure seal, for use solely in connection with collecting money for charity;
(e) pre-printed letters the primary purpose of which is to appeal for money for charity (not necessarily including the addressees’ particulars);
(f) envelopes used in conjunction with letters described in (e) above for forwarding donations, provided that they are over-printed with an appeal request related to that contained in the letter;
(g) outer envelopes used in conjunction with letters described in (e) above, provided that they are over-printed with an appeal request related to that contained in the letter;
(h) pre-printed collecting envelopes appealing for money (of the type used by the welfare charities and which are usually hand delivered to domestic premises); and
(i) stewardship envelopes used for planned giving which, as a minimum requirement, are pre-printed with the name of the relevant place of worship or other charity.
(2) Where this concession applies, the supply may be treated as if it were a zero-rated supply.
(3) This concession shall apply from 1 April 2000.
(4) The Commissioners may withdraw or restrict the application of this concession if they have reasonable cause to believe that it is being abused.
Your Charter explains what you can expect from us and what we expect from you. For more information, go to www.gov.uk/hmrc/your-charter
We would be pleased to receive any comments or suggestions you may have about this notice. Please write to:
HM Revenue & Customs
Policy: Charities and Healthcare
4th Floor East
New King’s Beam House
22 Upper Ground
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