Will we be taxed for selling wristbands?

The answer is simple

1. If a wristband is given out for free in response to a donation - large or small - no VAT is due on the money given.
2. But if an item is sold for a fixed price - say £1 for a wristband - this is taxable for VAT purposes.

The Charities Tax Reform Group (CTRG) has issued this clarification after discussion with the HM Revenue and Customs [HMRC].

Mark Nellthorp, Director of the Charities Business Stream at HMRC, explained, "Charitable donations which are freely given and for which nothing is received in return are outside the scope of VAT. Uncertainty may arise where a charity provides an item in response to a donation - this raises the issue of whether there is a supply for VAT purposes."

There are two methods by which a charity will typically make bands available to supporters:

1. selling them at a fixed (or minimum) price or
2. offering them freely in acknowledgement of support (perhaps suggesting but not requiring a particular donation amount).

The VAT treatment is different in each case.

• If an item is freely available, regardless of the scale of a donation, no VAT is due on the money given. This will be true even if a particular level of donation is suggested.
• If an item is sold for a fixed price there is a taxable supply for VAT purposes.

"Although this particularly enquiry relates specifically to wristbands, the approach outlined above applies to all items given freely in acknowledgement of support," Mr Nellthorp concluded.

Related

Wear the white wristband of the Make Poverty History campaign.