The Charity Tax Group, supported by the Charity Finance Group, has written to the Chancellor to submit Budget representations calling for an improved tax system for charities.
The response notes that our overall aim is to seek improvements to the tax system that would result in a simpler and fairer tax system for charities and it is glad to support Government steps that move in this direction.
In particular, we call on the Government to design a tax system in the light of COVID and Brexit that maximises the valuable impact of charities (seen so clearly during the pandemic) and does not undermine it. A joint sector response to the recent Treasury Committee Inquiry into Tax after Coronavirus outlined 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 existing business rates and VAT reliefs, future-proofing tax systems and legislation and call for improved collaboration and dialogue between HM Treasury and the charity sector on tax issues.
COVID-related support measures, such as the Job Retention Scheme, Expanded Retail Discount and temporary 5% VAT rate on hospitality, hotel and holiday accommodation, and admissions to certain attractions have helped many charities and should, as a minimum, be continued where possible while lockdown restrictions continue.
In the Budget submission we call on the Government to take the following steps to address five core tax policy issues facing charities at present:
1. Review the structural distortions caused by the VAT system resulting in significant irrecoverable VAT for charities. Consideration of a special VAT rate of 10% for charity purchases is one option. We also call on the Government to protect VAT reliefs and exemptions in the aftermath of Brexit.
2. Protect charity business rates relief in England following the recent “Fundamental Review”.
3. Continue investing in the Future of Gift Aid project to help ensure Gift Aid is fit for the digital age, including, where relevant allowing minor changes to legislation.
4. Adopt a flexible subsidy control system post-Brexit to ensure that that charities with large property portfolios do not miss out on essential business grants, designed to help mitigate the impacts of lockdown.
5. Consider a temporary increase in the value of Gift Aid to help charities recover from COVID-19.
In addition, we call on the Government to:
6. Bring forward the review of advertising and the associated tax treatment for charities, extending the VAT zero rate to social media advertising.
7. Agree to an extension of the 9 month time limit for payment of Gift Aid payments from trading subsidiaries to parent charities, due to the impact of COVID-19.
8. Protect the Community Infrastructure Levy charity exemption.
9. Extend the Apprenticeship Levy to training and/or volunteer costs.
10. Review the appropriateness of Insurance Premium Tax on charitable activities.
11. Extend the Listed Places of Worship Grant Scheme.
The full Budget submission can be accessed via the link below