Budget 2018: €5m VAT charity refund scheme welcomed

A €5 million VAT refund scheme for charities, announced as part of Budget 2018 by Minister for Finance and Public Reform Paschal Donohoe, has been given a warm welcome.

The scheme, to be introduced in 2019, will allow charities to claim back a portion of the VAT on goods and services they purchase in the preceding year.

Mr Donohoe said he was introducing the scheme “in recognition of the work undertaken by the charities”.

The announcement was widely welcomed by the charities sector, which has lobbied for the change for many years.

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The Charities Institute Ireland said Irish charities are major buyers of goods and services in the economy and are liable to VAT on their purchases.

"As a result, money raised for charitable purposes is often returned to the State through the payment of VAT," chief executive Lucy Masterson said.

Incentivising effort

“Today’s decision will put in place a mechanism to return some of that money and will provide charities with an incentive to increase fundraising efforts.”

The Wheel, an umbrella body for charities, described the scheme as a breakthrough.

Giving an example of VAT paid by a charity, it said The North and East Housing Association recently built nine houses in north Co Dublin at a cost of €1.25 million and in doing so paid €172,980 in VAT, "more than the cost of another family home".

Ivan Cooper, director of public policy with The Wheel, said VAT rebated to charities will be reinvested by them in vital services in areas such as housing, health and social care.