HM Revenue & Customs was planning to abolish the £8,500 threshold below which expenses and benefits are tax-free. But it has agreed to ditch the plan after the CTG argued that it could discourage volunteering and would be a huge administrative burden for charities that pay volunteers' expenses.
It would also have affected church bodies paying stipends to priests or honorariums to parish organists, the CTG said.
"Charities that rely heavily on volunteers would have had to set up systems to monitor and calculate the benefits and expenses paid," said Helen Donoghue, director of the CTG. "It would have been a significant disincentive to volunteers and to charities that rely on them."
Organisations such as the National Trust would have had particular difficulty adding its 49,000 volunteers to the payroll, she added.
An HMRC statement said: "The consultation indicates that the removal of the £8,500 threshold would have an adverse impact on low-paid employees and possibly the voluntary sector. The Government has therefore confirmed that it will retain the threshold."
Kate Engles, policy and information officer at Volunteering England, said: "We welcome any decision that limits barriers to volunteering, and we are pleased that HMRC has taken the needs of volunteers and charities into account."
Mark McGarry, direct tax partner at accounting firm Saffery Champness, said that under the proposed regulations charities might also have been obliged to pay the tax on behalf of volunteers if the benefits had become taxable.
Have your say...
Does your charity have enough volunteers? To vote, click on this week poll at the bottom of the Third Sector homepage.