Charity VAT exemptions for fundraising events under threat as HMRC ignores tribunal ruling
A landmark court victory for charity fundraising events has been overshadowed by HMRC’s refusal to align their policy with the tribunal’s findings. The Yorkshire Agricultural Society’s successful challenge to HMRC’s restrictive interpretation of VAT exemptions should have provided welcome clarity for the charity sector. Instead, charitable organisations find themselves caught between favourable legal precedent and an unchanged regulatory stance that continues to expose them to significant financial risks.
HMRC maintains restrictive stance despite court ruling
Although this complex matter has been resolved by the Courts with a favourable decision for the charity sector, HMRC are ignoring the decision and effectively maintaining their current policy. Don’t forget that if a charitable fund-raising event qualifies for the exemption from VAT, then it is also exempt from income tax or corporation tax, so the sums involved can be significant.
Currently, where a charitable organisation holds an event to raise funds for its charitable activities, income generated at the event can be exempt from VAT provided that ‘raising funds’ is the primary purpose of the event and that it is advertised and promoted as such. HMRC have long argued that fund-raising must be the sole primary purpose and that the event must be explicitly advertised as such.
The case of the Yorkshire Agricultural Society
A recent case involving the Yorkshire Agricultural Society concerned ticket sales and other income generated at the Yorkshire Show and whether the show would be treated as a fund-raising event.
The purpose of the show was both education and fundraising. HMRC argued that fundraising was not the sole primary purpose or, alternatively, that the joint purposes could not be separated or ranked, such that in either case the VAT exemption did not apply, and VAT was due. Considerable sums of money were at stake.
The Society won first at the First Tier Tribunal in 2023 and more recently at the Upper Tribunal in January 2025 when HMRC lost their appeal against the initial findings. With deathly silence from HMRC and under pressure from the charity sector to publish a revised policy, HMRC recently published Revenue and Customs Brief 3/25 to some consternation from the charity sector.
The Courts made four clear findings:
- First, events held for some other purpose which happen to make a financial surplus, even if planned that way, still do not qualify for the exemption from VAT. Nothing has changed in this respect.
- Secondly, although the Courts rejected the concept of several independent primary purposes, the Courts were very clear that if an event had several purposes including fundraising which were of equal importance and inter-dependent, the VAT exemption applied.
- Thirdly, the two purposes of the Yorkshire Show were so interdependent that the activities for which the funds were raised took place at the same event. In other words, fundraising does not have to be a separate activity as HMRC argued but can fund the event at which the fundraising takes place. “Without the fund-raising there would be no Show” as the charity eloquently put it.
- Lastly, although fundraising does have to be a clear purpose of the event, it does not have to be held out or promoted as the primary purpose.
Following HMRC’s published revised policy, where are we now?
HMRC are effectively ignoring the Courts’ decisions and maintaining their current restrictive policy.
HMRC have grudgingly accepted that there may be more than one ‘primary purpose’ for an event, but an organisation wanting to rely upon this must produce ‘objective, documentary evidence’ that the event was organised as a fund-raising event and that the multiple purposes cannot be ranked in terms of importance or separated.
It is unclear what HMRC might accept as ‘objective documentary evidence’ nor, indeed, what such evidence might consist of and if HMRC to reject what evidence an organisation produces they may be forced to a costly and lengthy Appeal simply to apply the Law.
HMRC have not acknowledged the very clear finding that the activities for which the funds are being raised could take place at the same event. This is likely to affect many organisations where, as the Yorkshire Agricultural Society said, the fund-raising was integral to the show being put on at all.
In summary, despite a very clear decision by the Courts in favour of the charitable sector and fund-raising events, relying upon the Courts’ decisions without HMRC’s prior approval is going to leave charitable organisations exposed to the risk of significant liabilities plus interest and penalties.
Don’t face VAT compliance alone
Charity fundraising events remain subject to complex VAT exemption rules that can result in significant liabilities and penalties if misapplied. Our VAT specialists can help you understand these complex fundraising exemptions and protect your organisation from unnecessary risks. Get expert guidance on charity VAT compliance to safeguard your fundraising activities.
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