The charity sector has urged the chancellor to extend VAT exemption beyond the Band Aid single.
Charity heavyweights have written to chancellor Gordon Brown to demand exemption from VAT after the government’s pledged to refund over £4m of the tax to Band Aid.
Brown’s gesture has received a mixed reaction from the charity sector. Shirley Scott, chief executive of the Charity Finance Directors’ Group, was due to write to Brown this week asking why ‘he has singled out a single, high-profile charity’.
The sector has been lobbying the Treasury for years in an attempt to be able to recover its VAT, which costs charities about £400m a year.
‘Obviously we are delighted that they are doing this, but we are writing to the chancellor asking him to extend it to everybody,’ said Sophie Chapman, policy officer at the CFDG.
‘We do wonder why (Band Aid) received this specific relief when we have been campaigning for God knows how long.’
A Treasury spokesman said the precedent was set ‘back in 1985’ when the then Tory government made a similar gesture to the original campaign.
‘Clearly the right thing to do for this government was to keep that intact,’ the spokesman said.
Nick Kavanagh, finance director of Save the Children and chairman of the Charity Tax Reform Group, said he was ‘delighted’ with the gesture. He said it would allow people to understand that ‘VAT is a major issue for charities in terms of both complexity and financial burden’.
The CTRG continues to work with the government to try and cut down on the complexity of VAT. ‘VAT hits charities’ fund-raising activities in all sorts of ways,’ the group said. ‘That is why the CTRG is concentrating its efforts on VAT reform … What is needed now, is to convert this one-off gesture into a universal measure applicable to all UK-registered charities.’
That seems unlikely, as the Treasury has reviewed the VAT status of charities twice, and on both occasions decided to stick with the status quo.
A new version of the 1985 single, featuring modern pop stars, was recorded at Air Studio at the weekend.