Tax reliefs for sector up to record high of nearly £3.7bn says HMRC

According to its annual statistics, the figure for 2015/16 is up by £280m on the previous year

HM Revenue & Customs
HM Revenue & Customs

Income from tax reliefs for the charity sector increased by £280m to a record high of almost £3.7bn in the 2015/16 financial year, provisional figures from HM Revenue & Customs show.

According to the annual UK Charity Tax Relief Statistics, charities received tax repayments worth £1.3bn, a £90m increase on 2014/15.

Gift Aid accounted for the majority of this increase, rising by £70m in 2015/16 to an overall £1.26bn.

Business rates relief also accounted for £1.79bn in 2014/15, a near £100m increase on 2014/15’s figures. This comes after a decision in the most recent Budget to maintain the charity sector’s 80 per cent mandatory business rates relief.

HMRC’s statistics also show that VAT reliefs for charities were worth £300m, no change from the previous two years, although this is rounded to the nearest £50m.

There was only a small increase in charities’ income from the Gift Aid Small Donations Scheme, from £21m in 2014/15 to £26m in the latest figures.

This is still substantially below initial government targets for the GASDS, which suggested that £135m could be raised by 2016/17. Legislation to reform the scheme is due to be introduced in the current parliament.

The annual figures also show that individuals gained £1.47bn in charitable tax reliefs in 2015/16.

Tax reliefs for individuals included inheritance tax, which increased by approximately £120m in 2015/16, payroll giving, gifts of shares and property and higher-rate relief.

The Charity Tax Group welcomed the business rates and Gift Aid increases, but raised concerns about the future of VAT reliefs after the EU referendum vote.

A spokesman for the CTG said: "With the future of the VAT system under scrutiny after the EU referendum, the CTG calls on the UK government to make a clear commitment to preserve the invaluable VAT reliefs enjoyed by charities and consider structural reform of the VAT system to remove the distorting effects of irrecoverable VAT.

"While the GASDS has increased, it is still experiencing far lower take-up than was originally envisaged. We await next year’s statistics to see whether the increased limits from April 2016 and the proposed reforms to the scheme, including a relaxation of the Gift Aid history requirement, will help to widen its accessibility, particularly among smaller charities."

Andrew O'Brien, head of policy and engagement at the Charity Finance Group, said: "The substantial rise in Gift Aid repayments and business rates is a positive sign that charities are continuing to maximize the value of these reliefs.
"However, these figures are a welcome reminder that there need to be big changes to the GASDS, which continues to underperform expectations. The government's consultation is still just tinkering around the edges, but hopefully it will be open to bold reform of the scheme so that small charities can make the most of it."

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