Effect of VAT rise on charities impossible to compute, says Treasury

Finance | Tania Mason | 10 Dec 2010

The government has said it is not possible to accurately assess the amount that the charitable sector will lose as a result of VAT rising to 20 per cent in January.

Liberal Democrat MP Bob Russell tabled a question in parliament recently asking the Chancellor how much more money HMRC will collect from charities after the VAT rate climbs, and how much total VAT the sector will pay during the 2010/11 financial year.

David Gauke, Exchequer Secretary (pictured), responded on behalf of George Osborne, pointing out that charities benefit from a range of tax reliefs worth around £3bn per annum, including various reliefs from VAT. Many of these benefits are “not enjoyed by charities elsewhere in Europe”, he said.

He went on to admit that charities carrying out non-taxable activities may incur irrecoverable VAT on their purchases “but information is not available to accurately assess the amount or the effect of the forthcoming increase in the standard rate of VAT”.

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