FINANCE NEWS: Stamp VAT will hurt charities' finances, says accountancy

Charities have been warned they could be facing a financial timebomb because of an EU plan to put VAT on stamps.

The European Commission has tabled a proposal to apply VAT to state-owned postal services in order to ensure equal treatment for private competitors.

According to accountancy Dean Statham, this will cost charities and small companies dearly.

Susan Whiting, a partner at the firm, said: "If VAT is applied to a first-class stamp at 17.5 per cent it would cost 33p. The issue of accounting for VAT on each stamp used would be a major headache for businesses of all sizes. Charities that rely on the post for donations could suffer a cruel blow. Even if the VAT rate was reduced on postage, as it is for many other items, to 5 per cent, this would still be a price rise at twice the rate of inflation."

Whiting advised charities to make more use of other forms of communication such as email. "It may be a subtle nudge to make use of more modern forms of communication. They should see if they can divert some of their communications via the internet rather than the postbox," she said.

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