The Budget offered a mixed package for the voluntary sector, with the 1 per cent rise in employer's National Insurance balanced by extensions of the Gift Aid scheme on donations and a promise to boost volunteering.
The Charity Finance Directors' Group (CFDG) estimated that the decision to increase national insurance by 1 per cent from April 2003 would cost the sector an extra £50 million a year, and called on the Government to exempt charities from the rise.
Les Jones, vice-chairman at CFDG and director of finance at WWF-UK, said: "This increase will have a direct effect on most charitable work and I hope Gordon Brown will look at ways the sector can be relieved of even more pressure on its costs and services."
There was also disappointment that the chancellor took no action on the sector's irrecoverable VAT bill, estimated at between £400 million and £1 billion a year.
Nick Kavanagh, chairman of the Charities' Tax Reform Group and finance director with Save the Children, said: "We will still keep pressing the chancellor to ensure charities are not penalised when spending their hard-raised money on charitable projects. It still remains the case that the more charities do, the more tax they pay."
But there was better news, however, with the introduction of new incentives on charitable giving.
Higher rate taxpayers are to be allowed to backdate their portion of Gift Aid to the previous year and, from 2004, taxpayers will be able to nominate a charity to receive any tax repayments due to them. The Gift Aid facility will also be advertised on the tax return.
Amanda Delew, director of the Giving Campaign, welcomed the new incentives. "These measures will help make giving to charity a natural part of everyone's financial planning and could generate millions of extra pounds for good causes. It's a chance for charities to target wealthy donors when they are filling in their tax returns,
Other measures affecting charities included income and corporation tax reliefs for individuals or companies that give land or buildings to charity.
The chancellor also promised "fiscal and other changes
to promote volunteering and community service. These will be outlined in the autumn in a discussion document published jointly with the Home Office.
THE BUDGET FOR CHARITIES
- Employers' national insurance contributions to rise by 1 per cent from April 2003. It is estimated that this will cost the sector £50 million extra a year
- From 2003, higher rate taxpayers will be able to backdate Gift Aid (at 18 per cent) to the previous year
- From 2004, taxpayers will be able to nominate a charity to receive all or part of tax repayments
- The Gift Aid facility is to be advertised on tax returns
- Income or corporation tax relief for individuals or companies who give land or buildings to a charity
- Construction of new annexes to be VAT zero-rated for the part of the annex used for a charitable purpose
- Converting or renovating property into a care home or multiple occupancy dwelling to be taxed at reduced-rate VAT of 5 per cent
- Introduction of the Community Investment Tax Credit for investment in Community Development Finance Institutions
- Introduction of £40 million Community Development Venture Fund
- Fiscal measures to promote volunteering to be announced in the autumn
- Starting rate of corporation tax reduced to zero (affecting charities' trading subsidiaries).