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MP lodges motion to exempt charities from VAT on texts

Fundraising | Gareth Jones | 1 Dec 2007

An early day motion has been tabled to parliament calling for charities to be made exempt from paying VAT on text messages.

Liberal Democrat MP and former shadow home secretary Mark Oaten said he had been assured that such a system would be technically viable and would bring Britain on a par with other European countries, some of which had already moved to a VAT-free charity text system.

Oaten also cited the precedent of fundraising for the Asian tsunami, where VAT on donations made using Premium SMS services was waived by HMRC in the face of public pressure.

He put forward the motion this week following concerns raised by a constituent, Roger Craven, managing director of SMS fundraising company Vir2. It has so far gained three other signatories.

Oaten said consultations between government, mobile phone companies and charities would be required to establish a well regulated and efficient scheme, but that the benefits were numerous.

“Everyone has a mobile phone these days and the volume of texts sent each week is quite staggering. Charities could greatly benefit from tapping into this expanding communication industry.

“The government needs to make moves towards establishing a system where charity donation text messages are VAT-free, like cash donations are, so that charities can maximise their output to those who need it most.”

Craven believes fundraising charities should be allocated special five-digit short codes which would be VAT-free. “Taking 17.5 per cent from donations made by Premium SMS is clearly inconsistent and unfairly penalises smaller charities,” he said.

However, Megan Pacey, director of policy and campaigns at the Institute of Fundraising, maintained the real problem was the high charges imposed by mobile phone networks.

“Currently the typical pricing structure on a text donation of £1 is that it costs the donor around £1.50 to donate. The additional 50p includes a VAT charge that amounts to approximately 4p. While a VAT exemption on SMS text donations would make a small difference, the SMS operators' charge, which range between 23 and 28p for the donation, will continue to make this donation mechanism largely inaccessible for the majority of charities.”

The Institute of Fundraising admitted earlier this year that it had stopped lobbying mobile phone companies on the issue, due to a lack of response from operators. However, Pacey said: “The Institute of Fundraising continues to call on mobile phone companies to reduce their charges and to introduce a long-term reduced charging structure that will ensure that text giving becomes a mainstream donation mechanism.”

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