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Welcoming Charity VAT Compensation Scheme in Budget 2018

24 October 2017
  • Finance Minister Paschal Donohoe presenting Budget 2018

The Irish Hospice Foundation has warmly welcomed the news in Budget 2018 that a Charity VAT Compensation Scheme will be introduced. This follows strong campaigning to help ease the burden on hospices nationwide.


The Charities VAT Compensation Scheme will take effect from 1 January 2018 and will be paid one year in arrears i.e. in 2019 charities will be able to reclaim some element of the VAT costs arising in 2018. Charities will be entitled to a refund of a proportion of their VAT costs based on the level of non-public funding they receive. The scheme, including the amount provided in the fund, will be subject to review after three years. Claims under the scheme cannot be made until 2019 as it will take some time for the Revenue to establish IT and administrative systems.

Payment of VAT is a serious burden for hospices nationally, especially those where a capital build is planned, explains The Irish Hospice Foundation (IHF). Capital builds are underway or planned in Dublin – North and South, Limerick, Galway, Mayo/Roscommon, Wicklow and Waterford, with long term plans for the Midlands, Drogheda and Cavan. It is current government policy that the capital costs of hospice units are funded from charitable sources – and to date voluntary hospice groups have funded the building of these vital facilities.

IHF CEO Sharon Foley said: "The requirement to pay VAT on build and fit-out expenditures adds a huge burden to hospices and increases their fundraising challenges – already strained in the current climate. As an example, if a capital build costs €11m – 13% of this represents VAT – a staggering €126,500 for each hospice. In addition the fit-out of each unit might cost €2m, so VAT will represent an additional €37,000 for the hospice. These costs should not be necessary for hospices and other such charities reliant on charitable fundraising from the public."

The Charities Institute Ireland has led the campaign for such a scheme for over fifteen years, and its Chief Executive Lucy Masterson described the 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.”

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