No VAT for charities, say FDs

The news that 87% of FDs back the move will pile more pressure on chancellor Gordon Brown who faces calls from 120 MPs who signed an Early Day Motion demanding measures to ease the VAT burden on charities.

Treasury spokesmen have consistently said Brown will not make VAT changes in next month's Budget.

Helen Donoghue of the Charities Tax Reform Group said several EC member states were locked in talks concerning the status of their charity VAT law.

Of the 258 finance directors who responded to this week's Big Question survey, 225 believe the government should change charity VAT law and allow the full recovery of the tax.

Only 7% argue charities should not be able to reclaim all their VAT.

The result is a surprising indictment of the government's approach to charity law. 'Charities play a vital role, filling the gap between corporations and government,' said John Buckley, FD at Sauter Automation. 'It is absurd for the government to penalise them by partially disallowing their VAT reclaim, when they exist largely because government itself doesn't do its job properly.'

One respondent said a change in law could increase the likelihood of the public donating because donors would know it was 'going to charity and not the government'.

The Treasury has said Brown will not help charities on VAT in next month's Budget. But Shirley Scott of the Charity Finance Directors' Group said she would continue to lobby the government. The group is considering whether to take the issue to Europe.