In July 2020, the Treasury Committee launched a new inquiry on ‘Tax after coronavirus’. The Committee sought feedback at what the major long-term pressures on the UK tax system are, what more the UK can do to protect its tax base from globalisation and technological change, and whether such pressures should be met with tax reform. The Committee also sought evidence on what overall level of taxation the economy can bear, the role of tax reliefs in rebuilding the economy, and whether there is a role for windfall taxes in the post-coronavirus world.
The Charity Tax Group (CTG) worked with CFG, NCVO and IoF to prepare a joint response to the inquiry. The response noted that as a result of COVID-19, traditional income sources for the charity sector have come under increased strain, while demand for services has increased. Charities benefit from important and valuable tax reliefs (estimated at £3.79bn in 2018/19) and it is important that any reforms to the tax system after Coronavirus, do not have any inadvertent adverse financial impacts on charities. Charities already face a cumulative burden of taxation, both in terms of tax payable (particularly irrecoverable VAT and employment taxes) and the administrative burden associated with compliance – both of which are higher than generally perceived by the public.
The response outlines a number of core principles that should underpin any reform of taxation going forward. As a minimum, existing charity tax reliefs should be protected and tax compliance and administration simplified. We highlight the importance of protecting valuable existing business rates and VAT reliefs, future-proofing tax systems and legislation and call for improved collaboration and dialogue between HMRC and the charity sector. The charity sector also makes a specific call for a Gift Aid Emergency Relief package to help ensure charities have sufficient funds to play a leading role in the COVID-19 recovery.
(*Response reproduced with permission of the Committee clerks – the Committee has not yet responded to the Inquiry)