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New campaign launched on irrecoverable VAT

Finance | Ian Allsop | 1 Nov 2005

The Charities' Tax Reform Group (CTRG) has launched a parliamentary campaign to secure a matching grant scheme for irrecoverable VAT. It says that the estimated £500 million VAT burden is 'illogical and unfair' and undermines the sector's capacity to deliver essential services to the vulnerable people they support.

Volunteer RNLI lifeboatman David Sporle, said: "When the RNLI spends generously donated money to provide a service, it pays £3.2 million in VAT that it cannot recover; this is not what we risk our lives for."

Nick Kavanagh, the Chairman of CTRG, said that the climate was right for change. "It makes little sense for the government to push tax efficient giving and then impose a tax when charities spend the extra money." He revealed four priority areas where a grant matching scheme is most needed as social welfare services, fundraising costs, joint ventures and shared services, and the repair of social housing and charitable buildings.

A MORI survey carried out in early September found that eight in 10 people believe the government should compensate charities in full for their irrecoverable VAT. The survey also revealed a low awareness of the tax status of charities and the fact that they pay VAT in the first place.

As well as having cross party support, the campaign is backed by all the major charitable umbrella organisations, including the CAF, acevo, NCVO, the Institute of Fundraising and CFDG.

Shirley Scott, CFDG chief executive, emphasised that providing a matching grant scheme to compensate charities for their irrecoverable VAT would not detract from the accountability of charities or their need to keep proper records and she said charities should make clear to the public the extent of their financial burden. Charities are being urged to include the amount of irrecoverable VAT they pay in their GuideStar entry.

Campbell Robb, director of public policy at NCVO said: "There is a disconnection between the Government's expectation that charities should play an increasing role in the delivery of services and their VAT treatment of charities."

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Who's Who: Campbell Robb