Smaller charities set to benefit from Budget VAT plans

Smaller charities could benefit from a change to VAT that will be made in this month's Budget.

The Treasury announced last week that chancellor Gordon Brown will include the introduction of the VAT flat-rate scheme for organisations, including charities, with a turnover of up to £100,000.

Charities that charge VAT on business activities could apply to join the scheme, which means they will pay a net percentage of their turnover annually in VAT. They won't have to keep a record of the VAT charge on each individual purchase. The Treasury says organisations will gain up to £1,000 a year in smaller administration costs.

Nick Kavanagh, chairman of the Charity Tax Reform Group, said: "We welcome it as far as it goes but it won't be a huge number of charities that benefit.

"Because charities are not like other businesses there will need to be separate arrangements for them but they will get some simplification of their VAT arrangements."

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