Editorial: Campaign for tax reform should not let up

Stephen Cook, editor

It's been a busy week on the swings and roundabouts of the charity VAT fairground. The bad news is that the High Court has ruled that the Bournemouth Symphony Orchestra must pay VAT on its ticket sales because its paid managing director also sits as an unpaid trustee (see Finance news, page 9).

The court ruled that this means the organisation is not "managed or administered" on an "essentially voluntary" basis. It's a decision that further muddies the waters and will cost the charity £150,000 a year.

Much better news - again in the High Court - is that The Children's Society has won its appeal over claiming back VAT on fundraising costs. The case originally concerned the narrow question of whether the charity could recover input VAT on the costs of its 'committed givers club'. In the end, after a European Court ruling in May, the case was broadened to the wider question of VAT recovery on all fundraising costs; the ruling means the charity will be able to reclaim such costs in proportion to its chargeable outputs, mostly sales. At a stroke, The Children's Society is £500,000 better off.

The outcome is a resounding success not just for the society but for charities in general, most of which will benefit. Many observers thought the charity didn't stand a chance, and it and its advisers should be congratulated for their guts and persistence.

The big question now is whether HM Revenue & Customs will appeal against the decision and precipitate another bout of uncertainty. The Children's Society and the Charities' Tax Reform Group have appealed for it not to do so, so that charities can enjoy a period of stability and put the extra tens of millions of pounds to good social use.

In the face of official resistance to a proper overhaul of VAT for charities, it might be tempting to seize on this unexpected bonus and ease up on the wider campaign. This would be a mistake. This judgement doesn't benefit all charities - those that don't do fundraising, for just one example - and there are many other anomalies that badly need sorting out.

The best way forward would be for the Government to accept the judgement of the court and use it as a foundation stone for building a fair deal for charities on all aspects of VAT.

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