How does the VAT fundraising exemption apply to your charity’s events?

On 9 January 2025 the Upper Tribunal released its decision in the Yorkshire Agricultural Society case [2025] UKUT 00004 (TCC). The outcome of this case clarifies the application of the VAT fundraising exemption for charities. The Tribunal concluded that fundraising events, even when intertwined with furthering the charity’s primary objectives, can benefit from VAT exemption. This decision has significant implications for how charities structure and promote their events, potentially allowing more events to qualify for VAT exemption. We explore the case below and its impact on charities and their tax position.

HMRC has long interpreted the VAT exemption for fundraising events on a narrow basis. This has resulted from the wording of the legislation requiring that the primary purpose of the event to be for the raising of money, and that the event be promoted as such. This had led to a slightly counterintuitive position. A fundraising event which was in all ways unconnected with the activities of the charity, except for the intention to raise funds, would benefit from an exemption. Meanwhile, an event which sought to raise funds alongside promoting the objectives of the charity would not.

The application of this legislation has now been clarified due to an Upper Tribunal Decision in relation to Yorkshire Agricultural Society which considered the application of the fundraising exemption to an annual event held by the charity.

The Yorkshire Agricultural Society is a charitable membership organisation with objects concerning the support of farmers and the education of the general public on farming and countryside matters. It operates the annual Great Yorkshire Show, which is a large agricultural show. Alongside delivering on objects around the promotion of farming and public education, the Show also delivers a surplus which is reinvested in charitable delivery.

The case surrounded whether the Show was a fundraising event within the meaning of Group 12 Schedule 9 of the VAT Act 1994. Following success by the taxpayer at the First Tier Tribunal, HMRC appealed the decision, and the case was heard at the Upper Tribunal. HMRC were again unsuccessful and as a result, a wider interpretation of the exemption may now be applied.

What was being considered and what did the Tribunal conclude

The legislation for the fundraising exemption requires, amongst other things that:

• The event is an event whose primary purpose is the raising of money, and
• The event is promoted as being primarily for the raising of money.

In relation to the first of these conditions, the Upper Tribunal found that it was possible for the exemption to apply in circumstances where the primary purpose of the event was fundraising which was inextricably intertwined with the furthering of the charity’s charitable purposes. This means that fundraising events which also aim to promote the charity’s objects may now benefit from exemption.

In relation to the second condition, the Tribunal found that the Principal VAT Directive had not been correctly applied when adopting the test into UK law. The PVD simply required that the event was “promoted as being for the raising of money”, which importantly excludes the word “primarily” from the test.

This means that provided the promotional activities make it clear that the event is intended to raise funds, they can also show that there will be charitable activities as part of the event.

What is the impact of the case on a charity’s tax position

The first impact is that charities which have historically treated events as being subject to VAT may be able to reconsider this, and to consider rectifying the position where this has resulted in an overpayment of VAT. This will require careful consideration and analysis of the full conditions of the exemption, which go beyond those points considered in the case.

Looking forwards, charities should also consider whether the exemption will apply to future fundraising events and, importantly, ensure that the events are structured in a way which enables this to be the case. It remains necessary for there to be a clear promotion of the fundraising objective and charities should not consider this to be achieved without careful consideration of how events are operated and promoted.

Many charities will have been able to treat profits from these events as exempt from corporation tax under the primary purpose trading rules. However, where this has not been the case, they may wish to consider whether the event could be exempt from corporation due to the exemption which applies to VAT exempt fundraising events. It may also affect decisions around structuring in the future, as it may no longer be necessary to operate events through a trading subsidiary. Clearly there will be wider considerations around charitable trading but it will change the dynamic.

One word of caution is to note that this decision relates to events held prior to Brexit. It is possible that HMRC may choose to challenge the existing decision in higher courts, or to take a different case if they consider there is an argument that there should be a different application of the law post-Brexit. It would be prudent to keep an eye on developments over the coming months.

If your charity needs help with navigating any elements of the tax landscape, Bates Wells can help. Get in touch with our charity tax specialist, Vikki Watts, to discuss.

The material in this article is provided for guidance and general information only and is not intended to constitute legal or other professional advice upon which you should rely. In particular, the information should not be used as a substitute for a full and proper consultation with a suitably qualified professional. Please do contact the Bates Wells team if you require further information.