Charities expect significant tax increases after the election

British Red Cross plans for additional £1m charge

Charities are budgeting for large tax rises after the election, according to finance directors at some of the country's largest charities.

Charles Nall, corporate services director at the Children's Society, told Third Sector he was expecting increases in VAT and national insurance that would increase the charity's annual tax bill by up to £1m.

"We feel national insurance and VAT are bound to rise," he said. "We're predicting that about 2 per cent more of our income will go in tax, making about 12 or 13 per cent of our income altogether.

"I think these figures would be fairly typical for an operating charity."

The rises would be in addition to the one percentage point rise in NI from April 2011, which has already been announced.

Rohan Hewavisenti, director of finance at the British Red Cross, said he also expected his charity to face tax rises of almost £1m.

"We expect VAT to rise, and for that to cost up to £400,000," he said. "And we certainly consider a national insurance rise a likely scenario. That could cost us another £500,000."

Both finance directors said charities would be significantly better off if the Government increased income tax instead of national insurance.

"Although this wouldn't make much difference to individuals, it would make a difference to charities because it would bring an increase in Gift Aid and would not increase employer contributions," said Hewavisenti.

Carol Rudge, head of not-for-profit at accountancy firm Grant Thornton, said her organisation was also predicting that charities would face VAT and national insurance increases.

Read Charles Nall's blog on budgeting for tax increases at the Children's Society.

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