When you pay a third party for goods or services that are received and used directly by your customer, these payments may qualify as disbursements for VAT purposes. If a cost is a genuine disbursement you do not charge VAT when recharging it to the customer, and you cannot reclaim any VAT charged by the supplier.
We recommend Xero because it’s clearer, easier and ideal for purpose‑driven organisations. Its tracking categories make grant and project reporting simple, and it integrates well with sustainability and impact tools. Xero also offers a 25% discount for eligible charities and non‑profits.
Important VAT changes are coming for charities and not-for-profits, including updates on fundraising exemptions, gift vouchers, and EU rules for virtual events. Stay informed to protect your compliance.
It is important to determine whether your income is subject to VAT or counts towards the VAT registration threshold. Accurate classification is essential, especially for organisations receiving grants or providing mixed supplies.
Business and Staff Entertainment, Annual Parties and Trivial Benefits
Business entertainment isn’t tax-deductible or VAT-reclaimable, but staff entertainment may be—especially if it’s inclusive and modest. Trivial benefits under £50 can also be gifted tax-free if they meet HMRC’s criteria.
