John Hemming, chair of the Charity Tax Group, has said he is uncomfortable with the way charities have had to pitch independently to get the VAT refunds that were announced in last year’s Autumn Statement.
Speaking at a session at CTG’s annual tax conference yesterday on “tackling irrecoverable VAT – where next for VAT refunds”, Hemming told delegates that the way charities, including the RNLI and Hospice UK, had to “pitch their own cases” to claim back VAT was not right and that there should be a sector-wide approach.
He said: “The idea that we’ve all got to start pitching our own cases I feel uncomfortable about. I think charities as a whole should be entitled to relief from VAT; after all we are providing a business service but don’t charge for it and that is the problem.
“Morally I think we all ought to get it but it would have to be a grants system, it couldn’t be built into the VAT system, because that would go beyond EU law. It would have to be some sort of subsidiary that could be removed or flexed as the government felt fit.”
His comments came following explanations by Darren Spivey, financial controller at RNLI, and Peter Ladanyi, VAT adviser to Hospice UK, of how they managed to reclaim VAT. In December 2014, the government announced VAT refund schemes worth up to £9m a year for hospices, search and rescue charities and air ambulances.
Spivey said that part of the reason he thinks they managed to get the VAT refunds was because search and rescue is a government obligation, and that if the charities did not do it the government would have to. He also attributed some of the success to its cooperation and shared training with other emergency services, including the fire brigade.
He said another reason he thinks the RNLI struck success was due to getting Oliver Letwin, who was promoted to head up the Cabinet Office following last month’s election, on board, as he was constituency MP to the charity’s finance director at the time.
Ladanyi echoed these points, adding that he thinks one of the reasons Hospice UK was able to get the VAT rebates was because MPs are often photographed in front of hospices, and therefore the charity was able to encourage MPs to follow up on their support. However, he added that despite the “pitching” it had undertaken, when the VAT rebates were announced in the Autumn Statement it was still “a bit of a surprise”.
Wider reform
Helen Donoghue, director at CTG, clarified that the CTG hadn’t given up on a wider reform of EU law, adding that it is still “working intensively” with other organisations across the EU on this.
Hemming said that it wasn’t too long ago that HMRC were saying that charities couldn’t have rebates because it was against EU law, but that the CTG confirmed that it was not the case. Each member state can choose to give rebates and decide itself how it wants to fund social initiatives.
He said the trouble with the “pitching” system is that if a charity is not a large organisation, it may not have the contacts to do this. He added that the CTG can help, but it is a matter of trying to get in with people who will support you.
Hemming said: “We have started the ball rolling, there is the ability and recognition that rebates can be done, but that it is a matter of having the political will to do so.” He added that he doesn’t see any legislative change happening in the near future.
