The Scottish Council for Voluntary Organisations has criticised other charity umbrella bodies for demanding a £1.5bn VAT rebate for the whole sector, and called for a "targeted approach" to prioritise independent voluntary organisations.

Last week chief executives of the Charity Finance Group, NCVO, Institute of Fundraising, Navca, the Association of Charitable Foundations and the Small Charities Coalition wrote to George Osborne, Chancellor of the Exchequer, asking him to use the Budget to extend the VAT rebate scheme that was introduced for hospices, search and rescue charities and air ambulances in the Autumn Statement.

Ruchir Shah, head of policy at SCVO, told Civil Society News that while his organisation supports measures to address the issue of irrecoverable VAT, it disagreed with the call for a “blanket” approach set out by other sector bodies.

SCVO wants the government to continue to extend rebates starting with health and social care organisations in a “targeted” way "particularly for health and care organisations" to ensure that independent charity organisations gain the most benefit.

He said: “Our problem is that we are in an environment where finances are being squeezed,” and that sector-wide rebate might “take away other areas of support for the sector”.

He added: “For us the big problem is that a lot of those organisation that rebate would benefit are non-voluntary sector charities, such as arm’s length external organisations, quangos and universities.”

John Hemming, chair of the Charity Tax Group, said: “We welcome the focus that is being given to the issue of irrecoverable VAT for charities and are glad that our concerns on this are shared by the whole sector. We have long called for equal treatment on VAT for charities and the most effective way of delivering this is through a VAT refund scheme.

"In the current climate of fiscal austerity we have felt it better to support calls for targeted refund schemes which will yield significant benefits for parts of the sector and thereby establish a precedent for a general refund mechanism. To this end, we have also concentrated on changing the underlying EU legislation and are glad that the European Commission has finally recognised the problems facing charities in their latest VAT consultations and even endorsed the introduction of rebate schemes."