The Irish revenue commissioners say 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. The scheme started in 2018 and applies to VAT paid on qualifying expenditure on or after 1 January 2018.
To benefit from the scheme, charities can submit one claim per year, which should relate to VAT paid on qualifying expenditure in the previous year only. For example, VAT paid on qualifying expenditure in 2018 can be claimed between 1 January and 30 June 2019.
The fund for the scheme is capped at €5m per year. Where the total amount of claims received in any year exceeds the capped amount, charities will be refunded on a pro-rata basis.
Commenting on the scheme, Teresa Hearty, manager in the Revenue’s Charities Unit, said the bulk of claims made, 61%, were from charities supporting the community, 16% were from religious charities, 15% were from those supporting education and 8% from charities involved in the relief of poverty.
Ms Hearty said Revenue is now undertaking a risk-based claims review process in respect of the scheme and has identified some incorrect claims. The main error, she said, relates to the inclusion of public funding in the amounts represented in the claim as qualifying income.
“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,” she said.
Ms Hearty said that allowing for the completion of the claims review process, Revenue expect to make refunds to qualifying claimants during October and November.
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