Talking Taxes with the CTG's John Hemming

The CTG is working hard to reduce the effects of a raft of new tax legislation and a bigger tax burden

John Hemming
John Hemming

The tax burden for charities is becoming greater as time goes on, says John Hemming, the new chair of the Charity Tax Group.

Hemming took over the post this year on an interim basis from Mike Parkinson of Oxfam, whose base in Oxford made it difficult for him to attend all the necessary meetings in central London.

Hemming says he has a big job ahead of him. In recent years, charities have experienced a bigger tax burden and a raft of new tax legislation. He and the CTG have worked hard to reduce the effects of both.

"Charities have the most complex and difficult VAT regime of all sectors in the UK," he says.

"Not only does it cost a lot of money, but it's also difficult to comply with the law.

"Other taxes also have a huge compliance burden for charities, compared with the money they raise for HMRC. This new tax map will allow us to identify where that burden falls."

He says the most noticeable of the new tax burdens that charities face is the increase in VAT to 20 per cent, which it is believed will cost the voluntary sector at least £140m a year.

One way to mitigate the effect, he says, is to educate local authorities about charities' tax issues and, in particular, to persuade them to offer contracts, not grants.

Councils often offer charities grants to provide services that could be provided on a contract basis, he says: this means that charities are unable to reclaim VAT and have a lot less money left over for service delivery.

The CTG would like the Treasury to provide guidance to help local authorities to pay charities in the most tax-efficient way, he says.

It will provide evidence to support the proposal to Justine Greening, the economic secretary to the Treasury.

Another target is VAT relief for charities that share back-office services. At present, an organisation created by a group of charities to provide services, such as IT or HR, has to charge VAT. Commercial companies that want to share such services can reclaim this cost, but charities cannot.

"This measure is something that ought to be put in place," Hemming says. "It has already been passed by the EU and is already in place in other countries."

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