Charity tax campaigners hope they can persuade the Government to delay a change in VAT law that could cost the sector millions next year.
The Charity Tax Group is in discussions with HM Revenue & Customs about the withdrawal of the staff hire concession, which will make employers liable for VAT on all the fees charged for temporary workers by employment agencies, including wages.
The change, which will be introduced on 1 April, is expected to have the biggest effect on charities in the healthcare and social housing sectors, because they employ large numbers of temporary workers.
"We're hopeful we can persuade the Government to give us a delay of one year," said Peter Jenkins, a technical consultant for the CTG. "Or if it won't give us a delay, to refund the VAT to the sector for a year.
"There are partial alternatives, such as putting temporary employees on the charity payroll, but continuing to pay a commission to the agency. But we need time to explore these alternatives.
"The potential impact on the sector is much greater than the Government's impact assessment predicted. We think it could be tens of millions of pounds."
It did not make sense for the Government to make it more difficult for org- anisations to hire temporary workers during a recession, he said, because short-term work could provide a route back into employment.
A spokesman for HMRC said the staff hire concession had to be withdrawn under EU law.
"HMRC gave more than 12 months' notice that the concession would be withdrawn," he said. "This gave plenty of time in which to prepare."