Chancellor will consider removing VAT on charities sharing services

Charity Tax Group is confident Alistair Darling will implement the change

The Charity Tax Group has said it is "absolutely delighted" by Chancellor Alistair Darling's pledge to consider implementing a VAT exemption for charities that share services.

Charities that charge each other for shared services currently have to pay VAT. The CTG said Marie Curie Cancer Care was currently paying £300,000 a year in VAT on services shared with other organisations.

The CTG, which campaigns for charities on tax issues, has been lobbying the Government to implement an EU directive that exempts charities from the tax.

Ministers have resisted so far, but in today's Budget the Chancellor said: "The Government will work with charities and other affected sectors to consider options for implementing the EU cost-sharing exemption.

"The Government recognises the efficiencies that can be achieved by organisations such as charities sharing services, and the potential VAT barrier that exists."

Helen Donoghue, director of the CTG, said she had spoken to Treasury officials and was confident the Government intended to implement the exemption.

"It will make an enormous difference," she said. "At the moment many charities don't share services because it ends up costing them more to work together than separately.

"This is one of the main issues we have been working on for the past year, so we are absolutely delighted."

Donoghue said she believed from her discussions with the Conservatives that they were also committed to introducing the exemption.

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