Irrecoverable VAT is estimated to cost the charity sector more than £400m a year. Charities are calling for the removal of the huge financial burden, together with exemption from national insurance rises to allow them to operate on a level playing field.
‘A lot of the competition charities face, especially in the services and care sector, compete with local authorities who are not affected by VAT at all,’ said Les Jones, director of finance at the World Wildlife Fund and vice chairman of the charity finance directors group. We think it’s anti-competitive as it stands.’
Liberal Democrat MP Bob Russell has persuaded more than 100 MPs to back a campaign to enable charities to receive compensation for the VAT they cannot recover.
Russell tabled an early day motion in January, which has been signed by 109 MPs so far. He described VAT and the impending rises in National Insurance, which will cost the sector a further #50m, as a ‘crippling financial burden on charities’.
‘Irrecoverable VAT has a massive impact on the ability of charities to achieve their objectives and help to deliver essential services,’ states Russell’s early day motion.
Whether or not to remove the burden on charities has been a perennial debate for successive chancellors. But John Whiting, a tax partner at PricewaterhouseCoopers, said he doubted the pressure would end in success.
‘I don’t think it will get very far,’ he said.
He said the idea had been ’round the houses’ before and that rather than give any blanket concessions, the government would usually pick off little bits for special attention. ‘I’d lay good odds on there being some charitable offer in the Budget,’ he said.
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