Charity tax setback

Charity finance directors have voiced concern over a further delay in the long-awaited government consultation document considering the review of charity taxation.

The document, which was due to be issued in the spring, is now expected to be published, at the earliest, after parliament reconvenes next year on 11 January.

The review was launched after advanced corporation tax relief was abolished for charities in July 1997.

David King, FD of Imperial Cancer Research and chairman of the Charity Finance Directors Group, said: ‘When this came out, it was seen as offering some relief after the demise of ACT.

‘One of the issues about the delay is that the loss of ACT could be forgotten.

We are anxious to try and keep in people’s minds that these changes are very expensive for this sector.’

‘What does worry me about the delay is whether some of the fundamental issues will be lost,’ he added.

The loss of ACT relief has been estimated to cost charities around #300m to #400m a year. As a result of these changes, some charities have been forced to pay more into pension funds and many have seen investment income shrink as a result of increased taxes.

When the review was announced, it was expected to address the concerns of charity finance directors by coming up with an alternative method of tax relief for ACT.

The subsequent postponement of the consultation document has caused scepticism among charity FDs that the review will manage to deliver on its promise – something which looks less likely the longer publication is delayed.

Nick Kavanagh, marketing accountant at the Save the Children Fund, said the additional wait would be worth it if the government was keen to properly address the growing needs of charities.

‘However, if the delay is because there is nothing in the review and they are waiting for the right time to put it out, then it is obviously bad news for us,’ he added.