CTG has responded to the Law Family Commission on Civil Society’s Call for Evidence on the potential of civil society. We very much endorse the Commission’s aim of unleashing the full power of civil society. To achieve this we believe that a fair fiscal environment for charities is absolutely critical. This will help enable the impact of the sector to be maximised.
Charities face ever-increasing financial pressures, particularly as a result of COVID-19. It is vital, that existing charitable tax and rates reliefs (including those relating to VAT and business rates) be maintained and built upon, and that the wider tax system be simplified and future-proofed. HMRC should ensure that guidance and legislation are updated to reflect technological change (for example on issues including the VAT status of medical equipment and advertising).
We foresee the tax landscape changing significantly as the cost of the pandemic is paid for and we consider it vital that charities are not subject to unintended consequences of tax changes that only think about the private sector.
CTG research commissioned from London Economics has found that charities incur nearly £2bn in irrecoverable VAT each year, money that could be better utilised to support civil society. Tax should not be an obstacle to charities delivering services that the private or public sectors are not suited to provide.
As an example of the positive steps that charities can take to improve their own position, CTG’s Future of Gift Aid project is taking the lead to make Gift Aid fit for the digital age. We would welcome the Law Family Commission’s support for this initiative, which already has buy-in from HMRC, charities, intermediaries and banks. We believe that it is a powerful example of how change can be brought about by the charity sector through positive thinking and the commitment to work in partnership with others.
We also believe that tax reliefs must remain available to all civil society organisations that have qualified for charity status. They should not be subject to political whim.
Our hope is that the Commission will raise the profile of civil society so that its issues are properly considered by key decision makers in Government. In particular, we encourage the Commission to call for the improvement (as well as the protection) of the support that charities receive through tax reliefs and exemptions. As a bare minimum, existing charity tax reliefs should be protected and tax compliance and administration simplified.