Finance News: Survey uncovers full tax burden

A new survey by the Charities Tax Reform Group has revealed the full extent of the irrecoverable VAT burden endured by major charities.

The worst affected charity was the Salvation Army, which in 2004 lost an estimated £5m in VAT. This is more than 3 per cent of its annual charitable expenditure of £162m.

The National Trust paid the taxman £3.9m of its 2004 charitable expenditure of £219m. The following year, Cancer Research UK spent £220m but lost £3.95m of this in tax - VAT on fundraising costs alone accounted for £2.5m of those losses.

Other major charities feeling the pinch are Scope and Save the Children, which in the last financial year paid £1.2m and £900,000 in VAT respectively.

In total, the CTRG has estimated that the sector pays at least £500m a year in VAT, with some charities losing as much as 10 per cent on their expenditure.

Andy Copestake, finance director of the National Trust, said: "Our irrecoverable VAT makes up more than 10 per cent of our annual income of £25m.

"That has a massive bearing on our ability to fund conservation projects, which is what we are all about. It is out of sync with what happens to local authorities and, frankly, it's not fair. It's a tax on charities."

Cancer Research UK estimated that its irrecoverable VAT burden could cover the entire running costs of eight laboratories at its London research institute for a year. The same amount would pay the salaries of the entire staff at the Centre for Cancer Therapeutics, which the charity funds, for 18 months.

Helen Donoghue, director of the CTRG, said: "To raise funds, charities need to invest in fundraising. The more they invest, the more VAT they pay, and when they spend the money they get taxed again.

"Although the figures involved are huge, it is not the money itself that should be the focus. It is what charities would be able to do with that money, such as saving the lives of dying people in Africa and funding cures for cancer - the list could go on and on."

Have you registered with us yet?

Register now to enjoy more articles and free email bulletins

Register
Already registered?
Sign in

Before commenting please read our rules for commenting on articles.

If you see a comment you find offensive, you can flag it as inappropriate. In the top right-hand corner of an individual comment, you will see 'flag as inappropriate'. Clicking this prompts us to review the comment. For further information see our rules for commenting on articles.

comments powered by Disqus