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NEWS > General > VAT Compensation Scheme research paper

VAT Compensation Scheme research paper

20 Apr 2021

The VAT compensation scheme was introduced in 2018 by the government with the aim of reducing the VAT burden on charities. When the concept was being developed, state funding had been increased for many charities while others relied heavily on fundraised income rather than being overly dependent on state funding. There was a view and this remains the case that independent fundraising is good for the sector, it not only reduces the burden on the state but also gives charities a greater sense of autonomy.

When the scheme was being finalised, there were many unknowns, the greatest of which was whether charities would actually apply for a VAT refund. Now in its third year, we can safely say that the scheme has been a resounding success, very much evidenced by its significant oversubscription. In 2019, Revenue reported that over 1,100 claims amounted to €37m, while 2020 saw 900 claims amounting to almost €40m.

There is clearly substantial demand for the scheme which has now entered a review phase. Cii and The Wheel have been engaging with The Department of Finance and Revenue to ascertain how well the scheme has worked, how has it been viewed by the sector, and the importance of its renewal. Thanks to the response and informal feedback from our membership over the last two years, we know that the sector wants the scheme to continue, the most pressing issue is to increase the current €5m cap to ensure that the scheme is accessible and meaningful to as many charities as possible.

While this will be an issue largely dealt with in our pre-budget submissions, we want to provide the Department of Finance with tangible evidence that the scheme has been a success as well as seeking feedback on possible scheme enhancements. This feedback will be collated and used to support the sector narrative being developed for the Department of Finance’s Tax Strategy Group review.

We would therefore very much appreciate your feedback on the questionnaire linked below:


As per previous communications, we are encouraging all our members to submit their claims well in advance of the 30 June deadline as well as ensuring that your application is right first time by following the clear guidance from Revenue, in particular, to ensure that you do not include public funding as qualifying income.

Just to let you know that the next Cii Members’ CFO Network will be held on the 22nd June with special guest presenter Caron Bradshaw OBE, Chief Executive of the Charity Finance Group. The full agenda will be released asap.


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