Last chance on taxes, warn charity finance experts

Mid-March is the deadline for charities to make their submissions to the Inland Revenue consultation on the government’s charity tax review, announced in July 1997.

Stephen Burgess, Saffery Champness charities’ director, said: ‘This is our final opportunity to influence the draft regulations before they go to Parliament.’More than £1bn of charities’ funds are lost to the taxman each year through the burden of irrecoverable VAT and the loss of Advance Corporation Tax relief. This accounts for eight per cent of the sector’s total income.

Charities had expected the review to focus on VAT reform and many groups united in calling for a grant back mechanism which would compensate for the loss of ACT relief.

Changes to the reforms were given a frosty reception by charities at a conference in London last week.

Officials from the Inland Revenue and Customs & Excise explained the thinking behind the latest plans to more than 300 charity representatives, with many hoping the government would announce further tax concessions.

But while Jim Harra of the Inland Revenue outlined the government’s willingness to reassess the proposed reforms, it continues to appear unlikely that chancellor Gordon Brown will relieve the sector of some of its tax bill.

‘It seems bizarre, when the government wishes to stimulate giving and is looking increasingly to charities to deliver social services, that it is collecting taxes on the costs of promoting giving,’ Burgess said.

But the Revenue insisted the government was not prepared to reverse its policies on ACT and VAT.

‘Tax relief can only be available for tax-payers otherwise the money would be coming out of public expenditure,’ Harra explained.

Delegates also complained the new proposals regarding Gift Aid declaration would discourage potential donors.

The conference followed a new survey by MORI, undertaken for the Charities Tax Reform Group, which revealed that 79% of the public disagree with government policy, saying that charities should not bear the financial burden of VAT.

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