Time running out for charities’ tax hopes.

Charity tax experts have warned there is limited time left for the sector to influence the government in the battle to cut the burden of taxation. 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 charity 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 charity 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. But while Jim Harra of the Revenue outlined the government’s willingness to reassess the reforms, it appears unlikely that the chancellor will relieve the sector of some of its tax bill. ‘It seems bizarre, that when the government wishes to stimulate giving and is looking increasingly to charities to deliver social services, it is collecting taxes on the costs of promoting giving,’ Burgess commented. But the Revenue insisted the government was not prepared to reverse its policies on ACT and VAT. ‘Tax relief can only be available for taxpayers otherwise the money would be coming out of public expenditure,’ Harra explained.

Related reading