VAT rates will not be frozen for charities’ non-business activities following the parliamentary review of amendments to the Finance Bill yesterday.

Labour MPs put forward the case for VAT on charities’ non-business activities to remain at 17.5 per cent as opposed to the 20 per cent charge which will come into force in January. But the proposed amendment to the Finance Bill was rejected after debate in the House of Commons.

Analysis highlighted by shadow chief Treasury secretary Liam Byrne (pictured) and collated by the Charity Tax Group and Acevo predicted a £150m hit for charities if the VAT rise goes ahead as planned.

Last night Byrne said: “Tonight, we set a fairness test for Coalition MPs and they comprehensively failed it.

“In the last few days we've exposed how Britain's pensioners face an £8bn VAT bill and how charities will be hit for millions of pounds.
 
“Tonight we gave Lib Dem and Tory MPs the chance to vote for a plan that would have protected pensioners and charities and they didn't have the guts to back us.
 
“It is the most extraordinary betrayal of Britain's most deserving.”

Byrne added that the “fight will be taken to the constituencies” by issuing each Labour MP with details of how the Liberal Democrat and Conservative MPs in their region voted to arm their campaign.

A further amendment put forward by Labour which would have delayed the VAT increase until a detailed impact assessment was undertaken was also voted against.