Charities Institute Ireland

VAT Compensation Scheme

Charities Institute Ireland outlines potential service benefits from Government’s new VAT scheme

Speaking in the wake of the Government’s decision in Budget 2018 to introduce a VAT Compensation Scheme for Irish charities, Charities Institute Ireland (Cii) set out estimated figures showing how the Scheme will enable charities to deliver more and better frontline services to people in need.

Irish charities are major buyer 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. Under the new scheme, charities will now for the first time be able to reclaim VAT in direct proportion to their fundraised income. 

Cii has led the campaign for such a scheme for over fifteen years, and its Chief Executive Lucy Masterson described Tuesday’s decision as “one of the most positive steps this sector has seen in years. It will directly positively impact those in need and it sends a strong signal from the state of the recognition of the role of charities in Ireland.”

The following are examples of some of the ways Irish charities and the people they serve will benefit from the VAT compensation scheme. Figures are based on the maximum potential return each charity could receive on their VAT costs. Under the pro-rata scheme, the total combined payment to charities will be capped at €5million.

  • For the Irish Cancer Society, the reclaimed VAT would fund over 1,300 nights of palliative home care night nursing

  • Pieta House’s 24-hour helpline costs €10,000 per month to run. The organisation estimates that under the new scheme they could reclaim up to €2,000 in VAT each month.

  • The VAT bill to host next year’s Special Olympics games, which will take place in Dublin, is expected to come in at €400,000. If Special Olympics Ireland (SOI) were able to reclaim the full amount in VAT it would cover the full costs for 290 participating athletes. Alternatively this amount would fund the SOI’s Young Athletes programme for children aged 4-7 with an intellectual disability for 18 months.

  • The Jack and Jill Foundation estimate it could reclaim between €4,000 and €6,000 each month. In real terms this means up to 375 hours of home nursing care will be made possible for children in every community across the country each month.

  • Saint Vincent de Paul incurs a €1m annual VAT bill, with the majority of its income coming from fundraising. The new scheme will have a significant income on the organisation’s ability to deliver additional fuel, food and provisions to the families they support in Ireland

  • The VAT costs on the new Mayo Roscommon Hospice build is €1.3million

Lucy Masterson explained: “The income of charities is broadly divided 60-40 between Government and private fundraising. Suppliers tend to find it incredible that it costs charities more to buy their products than it costs commercial organisations but that has been the reality.

The Irish public are extremely generous with their time and money. Ireland consistently ranks in the top 10 of the most generous countries on the global giving index, and over half a million of us show up in a voluntary capacity every week.  Charities make a huge contribution to the social and economic fabric of Ireland, providing €5bn to the Exchequer and directly employing 148,00 people. The social contribution is immeasurable with the work of charities supporting and improving the lives of millions of people in Ireland every year.”

Ireland joins just three other countries in the EU that have introduced similar schemes - Denmark, Netherlands and the UK.