Analysis: VAT triumph

VAT on charity text donations is to be abolished, after a year of lobbying from the voluntary sector. Hannah Jordan hears reactions

Lindsay Boswell, chief executive, Institute of Fundraising
Lindsay Boswell, chief executive, Institute of Fundraising

After more than a year of lobbying from voluntary sector organisations, the Mobile Data Association announced last month that VAT on charity text donations was to be abolished.

A group of five UK mobile network operators, represented by the MDA, announced that they were to launch a system that would allocate five-digit short codes beginning with '70' to registered charities. Donors that use the codes will still pay a fee to the operator and VAT will be applied, but tax will no longer be levied on the remaining amount of the donation.

The news comes more than a year after the Government said VAT should not be charged on donations made to charity by text message.

The changes mean the value of text donations to charity has increased by 15 per cent, but doubts remain about whether it will be enough to encourage more charities to use text appeals as a form of fundraising.

Lindsay Boswell, chief executive of the Institute of Fundraising, said the new system was a positive step, but until the operators brought down their charges so that more of each donation went to the cause, charities and donors would be reluctant to use it. "Operators have the power to create an environment for text giving to grow," he said. "We are asking them not to treat charitable donations in the same way as someone accessing a premium sex line."

If operators reduced their fees, more people would be likely to give by this method, he said.

"We need an operator to break ranks and to set up a separate fee structure and tariff for charities," he said.

Sarah Fitzgerald O'Connor, acquisition manager at Save the Children, said the charity's Gaza appeal had proved that texting was incredibly popular but had limitations as a fundraising technique.

"Cutting the VAT from text donations might make it more appealing for charities and donors to trial, but in reality it still has quite a way to go to before it becomes a viable channel that will raise significant amounts of money," she said.

Roger Craven, director of Vir2, a charity text donation service, said charities should be careful not to bite the hand that feeds them. "They must understand that mobile networks need to get something back," he said. "If they just ask for discounts without creating volumes of texts, they will alienate the networks."

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