Tax campaigners want the Government to apply an EU rule that would allow some charities to charge a reduced rate of VAT on elements of business expenditure.
The Charity Tax Group made the call in a submission to the Government in the run-up to next month's Budget. It identified a number of areas in which the Government could apply a concession, permitted under EU rules, that would allow social welfare charities to charge a rate of 5 per cent on business activities that do not compete with the private sector.
Under the proposal, charities would be able to reclaim VAT paid on costs incurred in providing a service at 15 per cent, but charge only the lower rate of 5 per cent to customers using the service.
Peter Jenkins, a technical consultant for the group, told Third Sector: "We're looking at identifying business activities that meet the needs of charities' beneficiaries, but which don't compete with regular commercial activities. It's an ideal solution because charities can reclaim all the VAT they have paid."
The CTG would first look at hotels for partially sighted people that were not in competition with the private sector, said Jenkins.