Tories consider review of tax problems faced by charities

A Conservative government might look again at how charities are treated by the tax system, says Nick Hurd

A Tory government would consider reviewing the way charities are treated by the tax system, according to Nick Hurd, the shadow charities minister.

Speaking at an election debate held by the Charity Finance Directors' Group last night at Portcullis House, London, Hurd condemned the complexity of the existing tax system for charities.

"There's been a failure to think through at the start the implications of tax on charities," he said.

 "There's a need to take a step back. There's a case for having a review of how the sector is treated by the tax system."

He said shared services, whereby charities that share back offices must pay VAT on those services, was a "particularly frustrating example".

Jenny Willott, the Liberal Democrat spokeswoman, said: "The system is messy and complicated and has not been properly thought through.

"There needs to be a step back to look at the whole set-up. There are some things that seem contrary to common sense."

The system was cumbersome and wasted time for charities and Government officials, she said.

Politicians found the system difficult to understand, Willott added. "There's also a huge cost in complying with it. That's dead money."

Angela Smith, Minister for the Third Sector, said the Government wanted to make progress in a number of areas, including Gift Aid reform.

She said a consensus was beginning to form among charities in support of one proposal.

"It really helps to put the case to the Treasury if there's a common position," she said. "The Treasury has previously raised with me that there were a number of very complex proposals around Gift Aid."

Willott said the Liberal Democrats had already committed themselves to putting a composite rate for charities in their manifesto, but had not yet decided what level that rate might be.

A composite rate would give charities the chance to claim increased Gift Aid on each donation but would not allow higher-rate taxpayers the opportunity to claim any personal tax relief on their donations.

Both Willott and Hurd said that it was possible to simplify the process of claiming Gift Aid.

"The Gift Aid system is archaic, out of date, bureaucratic and cumbersome," said Hurd. "We don't see why it couldn't be reformed now."

All three speakers said they were worried by the potential effects of falling public sector budgets on public commissioning.

Smith also said she was in favour of the wider introduction of community benefit clauses, which ask businesses to show their wider benefit to the community when they bid for public sector contracts.

"I'm aware of bids for local authority contracts where it says ‘and what else are you contributing to the aims of the council?'," she said. "We want to see that built in to more public sector contracts."


Have you registered with us yet?

Register now to enjoy more articles and free email bulletins

Already registered?
Sign in

Latest Jobs

RSS Feed

Third Sector Insight

Sponsored webcasts, surveys and expert reports from Third Sector partners


Expert hub

Insurance advice from Markel

How bad can cyber crime really get: cyber fraud #1

Promotion from Markel

In the first of a series, we investigate the risks to charities from having flawed cyber security - and why we need to up our game...

Third Sector Logo

Get our bulletins. Read more articles. Join a growing community of Third Sector professionals

Register now