Constable VAT & Charities Newsletter – March 2015

In this newsletter we have covered announcements made in the Budget which may be of interest to charities and not for profit organisations. In addition, we have set out the change in VAT liability of the printing and distribution of mail packs coming into force on 1 April 2015. A German case has recently been heard by the CJEU with regards to the VAT exemption for welfare services.


Budget 2015

Increased VAT registration and deregistration thresholds

The VAT registration threshold is to increase from £81,000 to £82,000 and the VAT deregistration threshold is to increase from £79,000 to £80,000.

VAT refunds for charities providing palliative care

As announced in the Autumn Statement 2014, hospice charities will be eligible for VAT refunds from 1 April 2015. Hospice charities will be able to reclaim VAT they incur on purchases made to support their non-business activities.

VAT refunds to medical courier charities

From 1 April 2015 blood bike charities whose main purpose is to provide a free, out of hours service to the NHS transporting urgently needed items, such as blood, platelets, samples for analysis, drugs, patient notes, small medical instruments and donor breast milk, will be included in the VAT refunds scheme and will be eligible for VAT refunds .

This measure will give medical courier charities broadly the same level of VAT recovery as is presently afforded to the established emergency services.

VAT refunds for search and rescue charities

In the Autumn Statement 2014 the government announced that search and rescue, and air ambulance charities will be eligible for VAT refunds with effect 1 April 2015.


Direct Mail Marketing – VAT Update for charities and not for profit organisations


From 2 April 2012 price controls were removed for most Royal Mail products and services including all bulk mail products. Products for which price controls were removed are now liable to VAT at the standard rate. This change has particularly impacted charities and not for profit organisations. Many charities entered into direct mail marketing arrangements with specialist companies which provide the printing and distribution of mail packs on behalf of charities (e.g. for the purposes of fundraising) to mitigate the impact of VAT on distribution. Supplies of direct mail marketing, including distribution, have been treated by many suppliers as a zero-rated supply of printed matter.

In a letter to the Direct Marketing Association (DMA) dated 16 July 2014 HMRC stated that it does not view postage services provided in addition to the production of printed matter as ancillary to the supply of printed matter. Following discussions between DMA and the Charity Tax Group (CTG) a broad agreement has been reached as to the VAT liability of direct mail marketing supplies and HMRC agreed to postpone the start date from 1 October 2014 to 1 April 2015 allowing time for those affected to implement the changes.


Going forward

We understand that the DMA and CTG have agreed the following with HMRC:

  • The printing and distribution of mail packs when provided together may continue to be treated as a single zero-rated supply until 31 March 2015.
  • The printing of mail packs (but not distribution) will continue to be zero-rated beyond 31 March 2015. The following may also form part of a single zero-rated supply:
    • The services necessary and essential for the preparation of the mail packs for mailing by a carrier (including addressing and sorting as required by the carrier).
    • All design and creative services prior to design and printing of the mail pack.
  • The supply of all services that are advisory, planning and strategic are standard rated as a separate supply.
  • The supply of distribution services are standard rated if provided as a separate supply and VAT exempt if provided by Royal Mail as an agency disbursement for the charity under downstream access arrangements.

HMRC has agreed retrospective VAT assessments and penalties will not be issued to businesses who misunderstood the guidance, except in cases where the single zero-rate supply has, in HMRC’s view, been structured to include advisory, planning and strategic services (which should be standard rated) or where arrangements are considered by HMRC to be abusive.

This is an important change effective from 1 April 2015. Charities and not for profit organisations will be incurring additional VAT costs which, if the cost does not directly relate to taxable business activities made by a VAT registered ‘person’, will be irrecoverable.


Court of Justice of the European Union (CJEU)

VAT exemption for supplies of services closely linked to welfare – temporary work agency

‘Go Fair’ (C-594/13) is a temporary work agency, it hires out care workers it employs (nurses and nursing assistants) to inpatient and outpatient care establishments. The care establishments are responsible for the supervision of the temporary agency workers and the agency workers are bound by the care establishments’ instruction. The German tax authorities took the view that Go Fair’s supplies did not fall within the VAT exemption for welfare because it does not itself operate an establishment involved in nursing and caring for persons in need. The German Court, however, thought that Go Fair did provide services which are closely linked to welfare and social security work, and that the possibility that Go Fair can rely of the direct effect of EU law cannot be ruled out. The German Court referred questions to the CJEU.

The CJEU specified that the services provided by the workers employed by Go Fair are not relevant. The CJEU examined whether a temporary work agency may be recognised as a body devoted to social wellbeing. Previous case law has determined that the term ‘body’ in the provisions for VAT exemption is sufficiently broad to include private, profit making entities. However, the CJEU found that the supply of workers is not, in itself, a supply of services ‘devoted to social wellbeing’. It is irrelevant that the staff members concerned are care workers or that they are supplied to recognised care establishments. Accordingly, Go Fair’s supplies do not fall within the VAT exemption as a temporary work agency is not ‘a body recognised as being devoted to social wellbeing’.


Constable VAT Consultancy LLP (CVC) is a specialist independent VAT practice with offices in London and East Anglia. We work together with many charities and not-for-profit bodies ranging from national charities to regionally based organisations. CVC has a nationwide client base.

We understand that charities wish to achieve their objectives whilst satisfying the legal requirements placed upon them. Charities may be liable to account for VAT on supplies made and VAT will be payable on certain expenditure. As irrecoverable VAT represents an absolute cost to most charities, regardless of their VAT registration status, there is a need to review the position regularly and carefully. We offer advice with planning initiatives, technical compliance issues, complex transactions, help with innovative ideas on VAT saving opportunities, and liaising with HMRC.

If you would like to discuss how VAT impacts on your organisation please contact Stewart Henry,  Laura Beckett or Sophie Cox on 020 7830 9669, 01206 321029 or via email on, and  Alternatively, please visit our website at where you can view some of the services we offer in more detail and subscribe to our free general and regular VAT alerts and updates. Visit our website for current news updates. You can also follow CVC on Twitter.

This newsletter is intended as a general guide to current VAT issues and is not intended to be a comprehensive statement of the law. No liability is accepted for the opinions it contains or for any errors or omissions. CVC cannot accept responsibility for loss incurred by any person, company or entity as a result of acting, or failing to act, on any material in this newsletter. Specialist VAT advice should always be sought in relation to your particular circumstance.