The government and the voluntary sector must work together to address ‘fundamental anomalies’ in tax and regulation, says the Charity Finance Group in its submission ahead of the upcoming Budget.

CFG emphasises in its paper that there is a strong need to focus on effectiveness of fundraising and engaging new generations, but that the government must do its part by meeting the sector halfway and providing greater incentives for people to give and invest in civil society.

The membership body’s specific recommendations to the government cover a range of areas, including the below:

HMRC's Charities Online

Increase the transitional period for the implementation of Charities Online to one year, or introduce flexibility in this period for charities that need it.

Gift aid small donations scheme

Ensure that charities with a range of structures are able to access the gift aid small donations scheme.

Tax in the sector

Maintain current zero-rating VAT exemptions; commit to consulting with the sector when making changes to VAT rules; explore sector-specific alternatives to the VAT cost-sharing exemption; and commit to a review on the issue of irrecoverable VAT for charities.

Trading

Review the tax position of charity trading and consider significantly raising the limit of non-primary purpose trading that charities can do without a subsidiary, or ideally remove the restriction altogether.

CFG’s full pre-Budget submission can be read on its website here.

‘State can help sector contribute more’

Caron Bradshaw, chief executive of CFG, said that tackling the deficit is the obvious priority for the government, but that growth “continues to be elusive” and that the state should look into the issues which are holding back the voluntary sector’s contribution to the economy.

“We’re asking government to look again at those issues that really inhibit innovation and investment,” she said. “As we work to sustain existing funding streams and explore new financing options, we need government engaged and focused on the long-term." 

Bradshaw welcomed the “constructive dialogue” announced in the autumn statement on digital giving and the Treasury's work on social investment, but added that “the long-standing sticky issues like unnecessary trading restrictions, defined benefit pensions and irrecoverable VAT, continue to hinder organisations up and down the country."

Bradshaw also said she hoped that the government had learned from 2012, and would closely examine tax and spending decisions for the impact they may have on charities in advance of the Budget, to avoid “nasty surprises”.

Last year’s Budget was most notable in the sector for the proposed tax allowance cap on donations, which was later scrapped.

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