Charity leaders ask government for a £1.5bn VAT rebate for the sector

HMRC (image credit: Steph Gray)

Charity leaders ask government for a £1.5bn VAT rebate for the sector 1

Finance | Kirsty Weakley | 5 Mar 2015

Leaders from six umbrella organisations have urged the government to use the Budget to extend a VAT rebate scheme which would save the charity sector up to £1.5bn per year.

In last year’s Autumn Statement the government introduced VAT rebates for hospices, search and rescue charities, and air ambulances.

In a pre-Budget submission this week chief executives of the Charity Finance Group, NCVO, Institute of Fundraising, Navca, the Association of Charitable Foundations and the Small Charities Coalition have written to George Osborne, Chancellor of the Exchequer, to make the case for extending the scheme to the whole sector.

They said that while they welcomed the measures in the Autumn Statement “this only scratches the surface of irrecoverable VAT which is a massive burden on charities”.

“Estimates vary, but the cost of irrecoverable VAT could be up to £1.5bn a year – money which is being spent by charities to deliver public benefit,” the letter said.

“Charities are having to operate in a tough financial environment with income, particularly from government, being squeezed.

“This makes having an effective system of tax reliefs for charities even more important. By removing tax barriers for charities, the government could free up hundreds of millions of pounds that could be directed towards charitable objectives – helping people at home and around the world.”

The letter called for the government to bring forward the review of the Gift Aid Small Donations Scheme, due in 2016, because: “Unfortunately, the scheme is too complicated for small charities and puts unnecessary barriers in the way of charities that may not have a history of fundraising – the same charities that this initiative should be supporting and encouraging.”

It also asks for a review into corporate gift aid to consider whether charities should be able to claim the tax relief rather than companies.

Help raise public awareness of gift aid

The letter also calls for support to raise the public awareness of gift aid.

The letter says that there are still hundreds of millions of pounds worth of donations that are not being gift aided by donors and that there should be a campaign to revitalise the image of gift aid and provide training for ‘trusted messengers’ such as charity volunteers.

“We believe that this could significantly increase the amount of gift aid claimed by the public ensuring that the value of donations is maximised,” the letter says.


Pauline Broomhead
Foundation for Social Improvement (FSI)
5 Mar 2015

Great to see that other umbrella bodies are asking for changes to the VAT system for charities. The FSI has been calling for change since 2013 when we first wrote to the Minister (Nick Herd) on this subject.

We have kept asking the question through contact with Ministers and during the first three weeks that Minister Rob Wilson was in office sent him a copy of the original request. We even blogged about it in 2014, we are right behind the other organisations requesting that this issue is looked at seriously Link to the blog


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