The government is “looking very seriously at the issue” of rebates to cover VAT paid by search and rescue charities and hospices, financial secretary Nicky Morgan told the Charity Tax Group annual conference yesterday.
Morgan, the minister with responsibility for charity tax affairs, made her comments in response to a question from Peter Jenkins, special adviser on VAT to the CTG.
Jenkins later told the conference, at the Wellcome Trust building in London, that he was hopeful that the government would “make a real promise in the Autumn Statement” to provide VAT rebates for these groups of charities.
The CTG has been working with umbrella bodies for hospices and rescue charities to lobby for rebate schemes for these organisations to bring them in line with rebates received by emergency services and NHS bodies.
Representatives met with Morgan and her officials before the Budget, and received commitments in the Budget to scrap VAT on fuel for air ambulances and a £1m grant for inland safety boat charities.
At present, search and rescue charities such as Mountain Rescue and Cave Rescue pay hundreds of thousands of pounds a year in VAT on essential equipment needed to save lives. The RNLI does not pay VAT on fuel and some equipment, but still faces a large VAT bill overall. Police, fire and rescue and coastguard services receive rebates to cover VAT they pay on equipment used to provide similar services.
In the same way, charitable hospices pay millions in VAT on equipment, while NHS hospices providing similar services receive rebates.
In total, charities pay around £1.3bn in irrecoverable VAT each year.
A report published last year by Monitor, the sector regulator for health, said that it was unfair that hospices and other charities providing NHS services should pay VAT.
Jenkins later told the conference that search and rescue charities were “a special case” because the government had obligations under international law to provide their services.
“We have had indications that this is being seriously considered,” Jenkins said. “We think there’s a reasonably fair wind behind it.”
