A: Although the intention is for the client to donate the sale proceeds to charity this is not a donation by the person buying the limited edition item since the customer is expecting to (and will) receive their item in return for this payment. Your client would need to account for VAT accordingly within the sale price and take this into consideration when they look at their profits and how much they donate to the charity. If, conversely, your client sells an item for a published set price but allows the customer to make a donation on top of this, this additional amount received would be outside the scope of VAT in your client's hands as long as: it was freely given, customer receives their item irrespective of a donation by them, and, there is nothing expected or provided by your client in return for this extra payment. Output tax would however still be due as normal on the set selling price for the item in question.
These publications from Markel Tax were correct at the time of going to press and should be considered as principles-based guidance only. To check current validity, call the Markel Tax helpline. ICAEW (as distributor) disclaims all liability for any errors or omissions.
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Markel Tax offers expert advice on UK tax and VAT via its helpline and provides monthly FAQs with questions and answers on common tax issues for businesses and practitioners.
