VAT Victory For Charity Sector
Vir2 today welcomed the written answer from the Treasury which states that VAT should not be charged on charity donations made by text.
The clarification came from Jane Kennedy MP, Financial Secretary to the Treasury, who, in a written answer to a question raised by Vir2’s constituency MP Mark Oaten, stated: ‘Donations to charity, including those made by text message, are outside the scope of VAT-which means that no VAT is payable on them.’
Text donations are a highly effective way for charities, particularly small ones, to raise money quickly and to communicate with supporters. The practice of charging VAT on the whole amount of any donation was previously widespread practice amongst UK mobile networks. Removing the VAT charge makes donation by text from mobile, for small donations, equally as efficient as debit or credit card.
Charity Technology Trust, a UK registered charity dedicated to promoting effective use of technology by charities, has worked with Vir2 to become the leading provider of text donation facilities in the UK with over 120 charities using the service. The Mobile Data Association have also backed the campaign as did the 160 Characters Association of mobile messaging professionals.
Last year, an average of 1 billion texts were sent every week and over the whole year £400m was spent using mobile premium SMS in the UK. The subject of VAT on text donations were first raised as an issue in the Asian Tsunami appeal when over £1 million was raised in just 3 days of launching the text campaign. On that occasion HMRC backed down in the face of overwhelming public pressure and gave a one off donation to the appeal in compensation for the VAT charged.
Text donations are now comparable with other ways of collecting donations in terms of the proportion payable to charity. Potential donors are as likely to carry a mobile as a credit card, but unlike credit cards, mobile phones are also a way for charities to communicate their appeals as well as an easy and convenient means of small value payment.
VAT-free short codes that can only be used by registered charities for the purpose of fundraising are, in Vir2’s opinion, the best future solution for the sector. The political head of steam that this campaign has built up has also been good for raising awareness of the potential uses for mobile technology in the third sector.
