Charities pay up to £3.7bn a year in tax, says Charity Tax Group report

They face 18 taxes and growing complexity, according to the Charity Tax Map

John Hemming, chair of the Charity Tax Group
John Hemming, chair of the Charity Tax Group

Charities are paying between £2.7bn and £3.7bn a year in tax, according to research by the Charity Tax Group.

The Charity Tax Map, based on a detailed survey, says charities are liable for a total of 18 different taxes. This will rise to 19 next year when the community infrastructure levy is introduced.

It says the two main taxes paid by charities are employer’s national insurance, which makes up 54 per cent of their tax liability, and VAT, which makes up 37.5 per cent.

Most of the remainder is made up by business and domestic rates.

The tax map, funded by the Nuffield Foundation, was based on detailed analyses of 31 general charities and universities, ranging from about £1m to £862m in annual turnover. It found they paid between 2 per cent and 18 per cent of their income in tax, with an average of about 6 per cent.

The report also found that charities spend hundreds of thousands of staff hours and tens of millions of pounds a year on complying with tax law.

John Hemming, chair of the Charity Tax Group, said the tax burden on charities, and the complexity of the tax law that charities were forced to manage, had risen in recent years.

"I would say that the amount of tax legislation charities have to deal with is 10 times the amount there was a decade ago," he said. "It’s made worse because many charities do not have well-paid professional advisers to handle this.

"Instead, they are asking volunteers to wade through a quagmire of tax legislation."

Hemming said the first tax map was based on a relatively small sample, and the group hoped to continue to develop a more accurate measurement in the future.

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