Vir2, which provides SMS-based marketing and fundraising solutions for charities, has welcomed a  written answer from the Treasury which states that VAT should not be charged on charity donations made by text.
The clarification came from Jane Kennedy MP, Financial Secretary to the Treasury, who, in a written answer to a question raised by Vir2s constituency MP Mark Oaten, stated:
Donations to charity, including those made by text message, are outside the scope of VAT – which means that no VAT is payable on them.
Text donations are a highly effective way for charities, particularly small ones, to raise money quickly and to communicate with supporters. According to Vir2, the practice of charging VAT on the whole amount of any donation was previously widespread among UK mobile networks. Removing the VAT charge makes donation by text from mobile, for small donations, equally as efficient as debit or credit card.
Charity Technology Trust, a UK-registered charity dedicated to promoting effective use of technology by charities, has worked with Vir2 to become a leading provider of text donation facilities in the UK, with over 120 charities using the service.
Vir2 says the result is a victory for its Managing Director, Roger Craven, who initiated the campaign, and the Liberal Democrat MP, Mark Oaten, who together have been lobbying hard to achieve a clarification. Jane Kennedys response was to a letter Mark Oaten wrote in October last year. Oaten had previously raised an Early Day Motion, co-sponsored by Peter Bottomley MP, calling for the removal of VAT charges on text donations.
The subject of VAT on text donations was first raised as an issue during the Asian Tsunami appeal, when over 1 million was raised in just three days of launching the text campaign. On that occasion, HMRC backed down in the face of overwhelming public pressure and gave a one-off donation to the appeal in compensation for the VAT charged.
Text donations are now comparable with other ways of collecting donations in terms of the proportion payable to charity, says Vir2 Managing Director Roger Craven. Potential donors are as likely to carry a mobile as a credit card, but unlike credit cards, mobile phones are also a way for charities to communicate their appeals, as well as an easy and convenient means of small value payment.
Craven adds that the political head of steam that the campaign has built up has been good for raising awareness of the potential uses for mobile technology in the charity sector.