The government should hold a root and branch review of the tax system for charities, according to the spokespeople for the two main opposition parties.

Speaking last night at an election debate organised by CFDG, Conservative Nick Hurd said: “I think there’s a general issue about perhaps taking a step back and looking at the various signals that the charity sector receives through the tax system at the moment.

“I’ve a feeling that over time it's got rather muddled. I’m not a Treasury minister but my first instinct is that through a desire to keep it simple there is probably a case for having an overall review of how the sector is treated through tax.”

Liberal Democrat Jenny Willott added: “Part of me thinks that if you took one element like shared services and tried to solve the VAT issue on that, then actually that might end up causing other problems elsewhere which haven’t been forseen.

“So what I would like to see is a much more holistic approach, looking at how all the interactions work and where you could produce savings.

“My gut says you could probably make quite a few changes that would effectively be revenue-neutral to the Treasury that would actually have benefits to the sector.”

Minister for the third sector Angela Smith, also at the event, emphasised that there are very few “simple measures” when it comes to tax, but said the special status for charities would certainly be protected, and that she will be discussing the issue of VAT on shared services with the Treasury.