Revenue has confirmed that over 1,100 claims, totalling almost €40m were made by charities under the Charities VAT Compensation Scheme.

The scheme, which was announced as part of Budget 2018, aims to reduce the VAT burden on charities and to partially compensate them for VAT paid in the day-to-day running of their activities.

Charities Institute Ireland (CII) has welcomed the news.

Over-subscribed

Chief executive Liz Hughes (pictured) said: “We welcome the announcement today by the Revenue Commission which highlights that the VAT Compensation Scheme has been hugely oversubscribed, reflecting the high level of spend by the charity sector.

“Charities Institute Ireland campaigned for this scheme and we are delighted to see the strong level of take-up which will give some much-needed funding back to charities who pay VAT.”

CII has made a pre-Budget submission asking for an increase in the annual allocation to €10 million per annum. The fund for the scheme is currently capped at €5m per year.

Qualifying expenditure

The scheme started in 2018 and applies to VAT paid on qualifying expenditure on or after 1 January 2018. To avail of the scheme, charities can submit one claim per year, for expenditure the previous year only. Where the total amount of claims received in any year exceeds the capped amount, charities will be refunded on a pro-rata basis.

Revenue’s Teresa Hearty said of the claims received: “61% were received from charities supporting the community, 16% from religious charities, 15% from charities supporting education and 8% from charities involved in the relief of poverty.” 

She added: “The closing date for submission of 2018 claims has passed and Revenue is now undertaking a risk-based claims review process in respect of the scheme. This review process is ongoing and has identified some incorrect claims.

Non-public funding

“The main error relates to the inclusion of public funding in the amounts represented in the claim as qualifying income. However, the scheme only entitles charities to refunds of VAT paid having regard to their level of non-public funding.

“Where invalid amounts, or other errors, are identified, Revenue will contact the relevant charity to explain the reason why the overall claim will be reduced and the elements of the claim amount that do not qualify.”

Valid refunds are expected to be made during October and November.