Overcharging of VAT on Charity related SMS text messages.

Charity2020

As part of the launch of a new charity related fundraising website, we hit on a major issue where SMS text donations classed as VAT exempt by the Revenue are having 21% VAT deducted by the mobile phone operators.

The phone operators will not give a commitment to update their in-house systems.

We have setup an Online Petition to highlight the issue and gain support.

The charities are losing 1000's of euro on this.
Please support. Just 15 seconds to sign the petition.
This will become a national issue as VAT will be very topical in the coming days This is an example of where clearly documented Revenue guidelines are being ignored. We need an implementation date.

dudara

Have you contacted the Revenue about this and asked for a VAT refund?

Swampy

Is your business collecting on behalf of the charity through the phone providers? If so, you are just a Service provider and subject to VAT. Does your business have a charity number?
As far as I know VAT can and is in some cases exempted if the charity has registerd the number themselves and not through an intermediary.

Charity2020

Just to explain....
A donator does a shortcode text donation via one of the operators.
The funds are then routed to the Revenue via an aggregator (txtnation, phonovation, etc). The VAT can only be reclaimed by the aggregator.
The process of reclaiming and passing it back up the line for redistribution is very complex.

The obvious answer in to have the operators recognise the charity shortcodes and not deduct for those. The Revenue clarified the guidelines in May-2011.

We launched the system (iDonate) on the Pat Kenny show as part of the local heroes visit to Tuam. We did not want to highlight the VAT issue as we felt they could latch on to it and it would take away from what the system is about. Pat Kenny did the first SMS text for Pieta House.

We are seeing huge interest from charities in what we are doing, but the VAT issue would not encourage anyone to support.
ComReg have given us clear guidelines on how we promote the service, which is good, as the donator knows exactly what goes to charity from their original donation.

Swampy

What percentage of each donation does idonate take for themselves?

If you Idonate and txtnation are middlemen for the donor and not a registered charity. You will profit from the donation. I don't see the revenue giving relief on the 21% if an aggregator is involved. It would be good money for the revenue. I do agree that the VAT should be exempted but there cannot be profiteering for the middleman piggybacking on charity donations.

Charity2020

Swampy wrote: »

What percentage of each donation does idonate take for themselves?

iDonate is owned by Western Webs, who offer their web design and hosting services free to charities. We currently manage a number of charity sites. We also have a considerable social media presence, including 150,000 Facebook fans. We are not planning this as a money making venture.

The SMS service we launched recently gives 1.05 euro to the charity from a donation of 1.50 euro - 70% return. This includes 0% margin for iDonate. The VAT is the main issue.

If we get the VAT issue resolved, we will be in a position to give 85% return. The 15% deduction will go on ComReg, Mobile Operator and Aggregator fees. We have included 3% for iDonate to cover credit card charges, bank fees and shortcode line purchase / rental. The cost of putting the website in place has been substantial.

I hope this explains.....

Paulw

This is more a business issue than a consumer issue then.

Take it up with the Revenue.

dudara

Agreed - this is indeed a business issue.

Moved to Entrprenurial & Business Management

dudara

Alan Shore

I agree, VAT and charities is a major cost. Great to see that you are doing this for free. Perhaps you should make this a little clearer on your website.

idonate is a registered business name of XYZ Ltd and is a not for profit enterprise to encourage donations to Charity. We do not earn any commission from donations.

Just a suggestion.

Is the takeup of text donations high enough to sustain losing 30% or 15% to costs when donating directly through a website costs say 3%. I'm thinking of Movember as an example of donating through a website.

Charity2020

Alan Shore wrote: »

Is the takeup of text donations high enough to sustain losing 30% or 15% to costs when donating directly through a website costs say 3%. I'm thinking of Movember as an example of donating through a website.

Text donations are typically 1- 5 euro.
Online donations are generally 20 - 50 euro.
Text donations will get more popular when the shortcodes are better understood.
Getting those numbers is still very expensive.

smeharg

I think the mobile operators have it right. If they charge a fee they must charge VAT.

If they, or the aggregator, waive their fee then there is no VAT.

It's clear from your postings that the mobile operators and aggregator are charging fees. Therefore, they must charge VAT.

What you need to do is get the mobile operators and aggregators to provide their services for free, which is unlikely to happen.

Just to be clear charities aren't exempt from VAT. If a charity is charged VAT it is a cost. There is no mechanism to reclaim.

Charity2020

smeharg wrote: »

I think the mobile operators have it right. If they charge a fee they must charge VAT.

Take an example of a 1 euro SMS donation.
The operators have a fee of approx 5 cents. They must charge VAT on this.
The problem is that they are charging VAT on the full 1 euro.
The Revenue clarified the situation last May and deemed SMS charity donations to be VAT free.
No problem paying VAT on the 5 cents.
The aggregator wanted 15% commission. We negotiated this down.
ComReg also have a service charge.
We have negotiated all of the commissions down to 15% total.
VAT will have to be paid on this, by each of those involved.

The issue is the operators paying VAT on the amount which is exempt.

smeharg

I don't know the background to Revenue issuing that guidance but I suspect that it was to address the problem you're having.

Have you spoken to Revenue about it? If done correctly that approach could be more effective than a petition.

Charity2020

smeharg wrote: »

I don't know the background to Revenue issuing that guidance but I suspect that it was to address the problem you're having.

Have you spoken to Revenue about it? If done correctly that approach could be more effective than a petition.

The Revenue are not the problem. They are gaining from the position at the moment and will not push the issue. There are some senior politicians getting involved and taking the case to the Minister. The operators are beginning to respond. I will just take one to do the right thing and then the others will follow. We are making progress. We would prefer to resolve this without going too public.
We do not want to turn it into a political football. Just resolve the issue and have the charities get what is due to them.
IMO the operators will do more than required - when they actually do it.

smeharg

iDonate wrote: »

The Revenue are not the problem. They are gaining from the position at the moment and will not push the issue. There are some senior politicians getting involved and taking the case to the Minister. The operators are beginning to respond. I will just take one to do the right thing and then the others will follow. We are making progress. We would prefer to resolve this without going too public.
We do not want to turn it into a political football. Just resolve the issue and have the charities get what is due to them.
IMO the operators will do more than required - when they actually do it.

It's Revenue's job to ensure the VAT code is operated correctly. If you have a problem with a supplier charging VAT incorrectly bring it to Revenue's attention.

If Revenue wasn't interested it wouldn't have issued the guidance.

Charity2020

There is a lot of interest in the SMS text donation system.
The VAT issue is still not resolved.
Looks like the operators are talking and there will be a new shortcode range issued for charities.
Eamon O Cuiv had proposed a refund in lieu to the charities of the amount of VAT paid. This is a workable short-term solution as iDonate could accurately outline how much VAT has been paid in error.