Public Sector – Shirley Scott.

Charities are amongst the few that dread a cut in tax rates so we are grateful that the chancellor has decided to reduce income tax through extension of the lower 10 pence rate rather than reducing the basic rate.

Every penny reduction in basic rate means we can reclaim from the Inland Revenue less tax paid by our donors.

Much as we welcomed the Getting Britain Giving campaign that made it easier for people to give to charities ‘tax effectively’ (i.e. in a way that means charities can get back the tax paid at standard rate), the sector is still waiting to reap the full benefit.

It costs money to raise money and members of the Charity Finance Directors’ Group have been looking closely at the system changes necessary to enable gift aid, pay roll giving and gifts of shares to be processed efficiently once the appeals for funds have gone out. The return on the investment may not be clear for months, or even years, yet.

True, the government is keeping its promise to provide funds to raise public awareness of the new ways of giving but it is just as important that the public has confidence that charities are spending their money wisely, so we must account for it properly.

Meanwhile, charities are still losing over £500m a year in irrecoverable VAT.

A glimmer of hope appeared in the Budget speech with the special arrangements to enable certain museums and galleries to reclaim their input VAT and to assist property conversions, churches and sports clubs.

We hope that is the thin end of a wedge that we will be able to drive in to achieve more.

After all, the charity sector contributes £15bn in monetary terms to the economy and about 1 in 50 of the workforce now work for them – yet most of the population think charities do not, and should not, pay tax at all.

This government is using the charity and voluntary sectors to deliver programmes and services that were once the prerogative of local or central government but the onus is still on charities to maintain other sources of income for their core funding. Recovering more VAT would certainly help.

So it’s not all gloom – and at least our staff get an increase in take-home pay, courtesy of Gordon Brown.

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