Text donations no longer subject to VAT

Fundraising | 4 Aug 2009

Donations made by text message will no longer be subject to VAT, the Mobile Data Association has announced today.

The move, which comes after years of lobbying from several voluntary sector organisations, and means charities of all sizes will be able to receive an extra 15 per cent on donations.

The system has been approved by mobile network operators Orange, 3, T-Mobile, Telefonica, 02 and Vodafone.

New codes

Under the new system charities that register will be assigned a new five-digit SMS code, which will begin with ‘70’.

Any donations sent to the new codes will still be subject to operator charges which attract VAT, but the VAT usually applied to the remainder will be waived from today.

Before now a £1.50 donation would typically result in a 95p donation to charity. When VAT is no longer charges an estimated £1.10 will reach the charity.

Hannah Terrey, head of policy and public affairs at the Charities Aid Foundation, said: "It's great news that the mobile phone companies have been able to agree a way forward to end this practice, which is unfair on donors and charities.

“Now they have made this leap forward we hope the mobile phone companies will bring down their charges too.”

Former chair of the Institute of Fundraising, Joe Saxton, said: “This is a giant step forward. Currently VAT and other charges are putting charities and donors off donating by text. We estimate donations from this type of giving could reach £100 million in five years’ time if charges come down to around 5p-10p per text in total.”

“WIN, one of the companies that processes texts for mobile phone operators has agreed to process text donations for free. What we need now is for one of the socially aware mobile phone companies like Virgin or Vodafone to take the lead in lowering their charges. Richard Branson – we need you!”

Directory: Institute of Fundraising

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