Friends of the Earth disappointed by VAT decision

The VAT Tribunal ruling will stop FoE reclaiming tax on the training and recruitment of fundraisers

Face-to-face: VAT blow for FoE
Face-to-face: VAT blow for FoE

Friends of the Earth has criticised a VAT Tribunal decision that will prevent the organisation regaining more than £1m in VAT relating to the training and recruitment of fundraisers.

According to the tribunal ruling, made earlier this month, the VAT dispute, which covers the period between May 2009 and May 2014, related to benefits provided by Friends of the Earth for supporters who pay £3 or more a month.

One of the benefits available is the Earthmatters magazine, which is provided free to those supporters.

Until May 2015, street fundraising was the main way in which Friends of the Earth gained supporters. The ruling says that fundraisers were trained "to use the magazine as a means to encourage them to give over the £3 mark".

The dispute centred on whether supporters of the charity entered into the £3 minimum payment in exchange for the magazine and other benefits or whether these benefits were a gift outside the scope of VAT.

This would have an impact on whether underlying costs, such as the training and recruitment of street fundraisers, were VAT-recoverable.

In its ruling, the tribunal says it was clear that the £3 minimum monthly payment "was not ‘for’ the magazine and benefits" and "was quite clearly a donation to support the appellant’s charitable activities".

For this reason, the ruling says, it is "not therefore necessary to deal with the parties’ arguments as to the attribution of the supply and whether it was zero-rated". It rejects Friends of the Earth’s claims for VAT recovery.

Craig Bennett, chief executive of Friends of the Earth, said it would explore whether to appeal the tribunal’s decision.

He said: "This is a disappointing and confusing decision. We acted in line with previous guidance from HM Revenue & Customs and it was also consistent with the rest of the charity sector.

"This decision could have implications across the sector, with charities ending up paying more money to the tax man.

"The question is: why is HMRC targeting charities rather than going after large corporations?"

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