Opinion: Third Voice - The real story behind Gordon's Gift Aid reforms

Nick Brooks is head of not-for-profit at the chartered accountancy firm Kingston Smith.

A recent Mori survey found that eight in ten people believe the Government should compensate charities in full for their irrecoverable VAT.

On 13 October, the Charities' Tax Reform Group launched its parliamentary campaign on VAT in the House of Commons. An Early Day Motion was tabled, calling on the Government to introduce measures to reduce or remove the crippling VAT burden on charities. It immediately attracted the support of 65 MPs - a number the CTRG hopes will rise in the coming months.

But what has all of this to do with Gordon Brown and his U-turn on Gift Aid, particularly in the context of telephone donations? On the face of it, absolutely nothing.

On closer inspection, however, a connection comes into focus. The Chancellor's announcement of a "Gift Aid boost to charities" was made on 7 October, the week before the CTRG launched its campaign. Cynics might say the timing was calculated to lessen the impact of this campaign - it would be difficult for charities to campaign for a second tax concession in one week.

According to a recent story in The Times, the Gift Aid reform represents "a multi-million pound windfall" for charities. Is the sector being unreasonable to expect the Treasury to relieve the VAT burden too?

However, things are not quite how they appear. When the Treasury's press release is read closely, the generous concession that "HM Revenue & Customs will remove the requirement on charities to write to each individual donor to confirm that Gift Aid can be claimed following their telephone donation" is qualified, if not altogether reversed, in a subsidiary note. It says: "The new regulations will remove the requirement, where the charity has maintained satisfactory records linking the donor to the making of a declaration."

As Third Sector reported on 12 October, this translates as meaning that charities will instead have to keep potentially expensive technological records for six years. Judging by the response of some of the larger charities that raise funds through telephone appeals, the benefits are minimal.

Is the Chancellor giving with one hand, only to take away with the other?

And all for the sake of diverting the public's gaze away from the one real tax reform that would benefit all charities - Treasury compensation for irrecoverable VAT.

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