Insurance premium tax bill 'could be £83m by 2020', Charity Finance Group warns

In a briefing paper distributed before tomorrow's Budget, the CFG says raising IPT to 20 per cent could leave the sector with a tax bill equivalent to 0.3 per cent of its spending on charitable activities

Charity Finance Group
Charity Finance Group

- This story has been corrected; please see final paragraph

The charity sector could face an annual insurance premium tax bill of £83m by 2020, the Charity Finance Group has warned, amid fears that the rate of the tax will be increased to 20 per cent.

In a parliamentary briefing that has been sent to all MPs today before tomorrow’s Budget, the CFG says charities should be granted an exemption from IPT, a tax on general insurance premiums such as building or car insurance.

The IPT rate is already due to increase to 12 per cent in June. It will have doubled in only 18 months.

The CFG fears that the Chancellor will increase the rate of IPT in the Budget. The briefing says that if it is raised to the same rate as VAT, which is 20 per cent, it could leave the charity sector with a tax bill equivalent to 0.3 per cent of its spending on charitable activities.

The CFG says such an increase could leave assets such as heritage buildings at risk and increase the burden on volunteer-run charities.

The briefing says the average IPT bill for a charity with an annual income of less than £500,000 has already increased from £80 to £190 a year, which it says can be a significant part of its costs, especially if it is reliant on donations from the local community.

The Neighbourhood & Home Watch Network has warned that it would have to either reduce insurance cover to try to bring costs down or reduce staff hours or numbers if IPT was increased, the CFG briefing says.

Anjelica Finnegan, policy and research manager at the CFG, said: "At a time when charities face increasing and more complex demands on services, strain on finances and economic uncertainty, the government should not increase charities’ overheads.

"If the Chancellor decides to raise IPT even higher, the result will simply be less money for charities to spend on their charitable activities.

"We urge the Chancellor to take on board our proposal to reduce the costs of IPT for charities in the short term, with a view to exempting charities in the longer term."

A campaign and a petition were launched earlier this year, calling for charities to be exempted from IPT. the petition has attracted more than 1,400 signatures so far.

- The CFG briefing originally said that raising IPT to 20 per cent could leave the voluntary sector with a tax bill equivalent to 3 per cent of its spending on charitable activities, but the figure should have been 0.3 per cent. 

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