The palliative care charity Sue Ryder Care will lobby the government in a bid to win VAT relief for charities providing public services.
Paul Woodward, chief executive of Sue Ryder, said that today's increase in VAT from 17.5 per cent to 20 per cent meant Sue Ryder's annual VAT bill would top £1m.
He said charities should be placed on an even footing with limited companies, local authorities and parts of the NHS, all of which are able to reclaim VAT in ways that charities are not.
"We've heard a lot about the big society and we support the idea of charities delivering more high-quality, innovative and cost-effective public services," he said.
"However, this is only possible if we are afforded the same benefits that the NHS and local authorities are given relating to VAT."
John Hemming, chair of the Charity Tax Group, said his organisation supported moves to put charities on a level playing field with other public service providers.
"This would be the first step towards equality for charities that are being asked to provide more public services," he said. "Under the current regime, charities lose out compared with the organisations they're competing with."
The charity sector is likely to pay about £140m more in VAT in 2011, according to figures produced by the CTG in June.
The CTG warned that charities would face an annual irrecoverable VAT bill of at least £1.1bn and possibly as much as £1.5bn. Smaller charities are likely to pay about 4.4 per cent of their total income in irrecoverable VAT.