A charity tax lobby group has called for VAT reform for charities after new HM Revenue & Customs (HMRC) statistics revealed that tax reliefs for charities totalled £3.3 billion in 2014-15.
The provisional figure is made up mainly of £1.64 billion in business rates relief and £1.2 billion from Gift Aid, plus £300 million in VAT reliefs and £170 million in stamp duty land tax relief. The figure is £240 million up on the previous year.
John Hemming, chair of the Charity Tax Group (CTG), said: “We welcome this increase, as these tax reliefs are invaluable to the sector, particularly at a time when their finances are under such great pressure.
We will continue to work with the incoming Government to increase eligible Gift Aid uptake. We will also be making strong representations to the consultation on the future of business rates; the relief is vitally important to charities and must be maintained.
“Take-up of the Gift Aid Small Donations Scheme is still disappointing although the proposed extension of the scheme is welcome. The scheme is due to be reviewed next year and we will be urging the new Government to review some of the eligibility requirements which have prevented it from reaching its full potential and benefitting many smaller charities.
“Despite these important reliefs, charities still face a major inequality in the tax system, incurring £1.5bn a year in irrecoverable VAT. The introduction of VAT refunds for hospices and search and rescue charities has established an important precedent, on which we hope to build during the next Parliament.”
Provisional figures also indicate that tax reliefs for individuals on gifts to charities rose by £100 million to £1.2 billion, following increases in inheritance tax relief, higher rate relief on Gift Aid and covenants and relief on gifts and shares.
Claiming all tax relief due will provide valuable extra resources to fund charities’ core work. Alongside our charity expertise, Moore Thompson can advise on all aspects of tax, to assist in maximising tax efficiency. For more information, please contact us.