Exclusive – Charity hopes raised for tax breaks

In a reversal of its previously hardline stance, Whitehall has signalled it will consider measures to relieve the £400m-a-year burden imposed on the British charity sector by the abolition of advance corporation tax relief two years ago, Accountancy Age has learned.

Chris Talbot, head of Customs & Excise’s VAT social division, is leading a major review of charity tax and has indicated the government will listen to new ideas if there is a strong enough will from the sector.

This will delight frustrated charity finance directors who have been campaigning for compensation for the loss of ACT relief, but have been disappointed by indications this month that the door had been closed on further consultation.

Whitehall insiders also this week revealed that £50m has been earmarked to modernise the charity VAT regime and achieve greater consistency between VAT, direct taxes and trading concessions.

Charity chiefs have consistently called for measures to offset an additional £400m a year burden on the sector caused by irrecoverable VAT.

The Charity Finance Directors’ Group welcomed the news, but director Shirley Scott said the £50m would have to be used through a tax relief and not add to public expenditure.

Ministers have claimed Whitehall is powerless to change VAT rules because of European law. Now, however, the £12bn sector looks set to be given another opportunity to influence the future direction of its indirect taxes.

‘Customs seems to be urging the sector to explain what is important in terms of VAT and why it is a good idea to change it. If that happens, the government seems prepared to do what it can to help,’ said Stephen Burgess, charities director at Saffery Champness, adding charities needed to prepare ideas to modernise VAT.

Charities such as Children’s Aid Direct, which has worked in the Balkans (above) for the past eight years, have been campaigning for compensation for the loss of ACT relief.

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