Reform group turns up the heat on charity VAT

The Charities Tax Reform Group has abandoned its 'softly softly' approach and is to mount a high-profile campaign for changes to VAT for charities, timed to coincide with Britain's presidency of the European Union from next month.

The change stems from disillusion with its earlier methods of lobbying quietly behind the scenes. It feels this has produced some administrative changes but no significant action from ministers, while more outspoken campaigners such as Bob Geldof have achieved results.

"The sector has reached the conclusion that we have to be a great deal more vocal to ensure this problem gets the attention it deserves," said Helen Donoghue, director of the CTRG. "Many of our 400 member charities have said that we have given the Government the benefit of the doubt, but it hasn't delivered. Its attitude has been 'go away and shut up'."

The main problem for the sector is that it has to pay VAT on its purchases, but cannot - unlike businesses - charge offsetting VAT on its services because 'products' such as social care are exempt or outside the VAT system.

Local authorities providing social care, however, are permitted to claim back their 'input VAT'.

The CTRG has calculated that, as a proportion of total expenditure, charities are paying about three-and-a-half times more VAT than commercial organisations.

The sector pays an estimated £500m in irrecoverable VAT, which is nearly as much as the £586m it receives from the Treasury through Gift Aid.

"The whole system is a complete dog's breakfast," said Donoghue. "We need a simple, straightforward system that is easy to deal with and administer. We are having constant battles and our only recourse, the VAT tribunal - which costs up to £30,000 - often just leads to more complication."

- See VAT campaign, page 4, Policy and Politics, page 12, Finance, page 16 and Editorial, page 22.

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