*UPDATE: DCMS published the Civil Society Strategy in August 2018.*

In early 2018, the Minister for Sport and Civil Society launched a public call for evidence on a new strategy to harnesses the power of communities, charities, and businesses to help build a fairer society. While the main focus of the consultation was on building stronger communities and strengthening civil society, the funding and finances sections provided opportunities to comment on the taxation environment that charities face, as well as examples of the tax system providing barriers to collaboration.

The Government published a response to the consultation. People and organisations who responded said that the Government should ensure that tax frameworks support civil society. This included suggestions to bring greater coherence to taxing charities, social enterprises, cooperatives, and businesses. There were recommendations that Government should publicise existing tax reliefs better, expand Social Investment Tax Relief, and incentivise cross-sector collaboration.

In the consultation summary, the Government stated that it is keen to use various tools to support the future funding and finance environment for the sector. Promoting philanthropy, ensuring taxes and regulation support civil society, and bringing different sources of funding and investment together for social impact, are all ways in which the government will support resilience and increased impact of the sector.

Specifically, the Government committed to reviewing the Social Investment Tax Relief in 2019. Reducing restrictions on the size and type of projects which can claim Social Investment Tax Relief could accelerate communities taking ownership of important community assets and expand the use of small scale finance for community energy projects. In these areas, Social Investment Tax Relief could play a bigger role in helping social sector organisations to be more financially resilient.

The response also notes the existing tax reliefs charities benefit from, although there is no reference to the amount of tax that is still paid, particularly in relation to irrecoverable VAT.

The Government confirmed that it would review the “operation and impact” of the Fundraising Regulator, and work with the Charity Commission to “to explore options for placing it on a secure and sustainable financial footing and ensuring it is adequately resourced to meet future challenges”.