Tax and VAT

Charities operate in a complex tax environment which with one hand provides favourable tax reliefs but with the other hand imposes unfair tax burdens. It is imperative that charities understand tax and the implications it has on the various activities they undertake or they can find themselves facing tax liabilities or missing out on valuable tax reliefs.

CFDG helps charities navigate the complexities of the tax system, keeping you up to date on the latest developments taking place in the sector and enabling you to help shape future government policy by taking part in consultations and campaigns.

Recent VAT cases

HMRC vs. Leisure Group Pass (LPG) ltd.: entry to multiple tourist attractions
12 September 2008
The LPG sell the 'London Pass', which gives free entry to a large number of attractions in and around London. The issue was whether LPG was liable to account to HMRC for VAT on the receipts from sales of the Passes, or whether no VAT was payable at that stage because of a provision in Schedule 10A to the VATA 1994 about 'face-value vouchers'. If the provision applied VAT was payable by the attractions themselves and LPG was not liable to pay VAT at all. The Tribunal agreed with HMRC that 'face-value voucher' did not apply to the Passes because they represent the right to receive services, but not that right, 'up to the value of an amount.'
Full case details

HMRC vs. Age Concern Leicestershire and Rutland: welfare services
6 August 2008
Age Concern Leicestershire and Rutland has lost an appeal at the VAT tribunal where it argued against the application of the welfare services exemption. Deloitte suggest that this was to enhance its input VAT recovery. Age Concern argued that, contractually, the services were supplied to the council/PCT so they could not be welfare services within the scope of the exemption. The Tribunal concluded that the services provided by the Appellant ... constitute supplies of welfare services and are thus exempt from VAT.
Full case details

HMRC vs. Oxfam: fundraiser's fees
30 July 2008
Oxfam appealed against HMRC’s rejection of a claim for a repayment of VAT on the fees of professional fundraisers engaged to procure regular donations from members of the public, usually by approaching them in the street. The appeal was dismissed, and the High Court only went as far as ruling that some of the VAT incurred on unrestricted fundraising expenditure may count as input tax dependent upon whether the expenditure was used for business purposes and for taxable supplies.
Full case details

Renovating buildings
15 July 2008
The VAT and Duties Tribunal have ruled that Whitechapel Art Gallery should be able to use a VAT saving scheme when renovating property. We have a briefing on the case from SOC VAT director Socrates Socratous, who represented Whitechapel Art Gallery in their appeal to the Tribunal.
Download the briefing
Third Sector story

HMRC vs. BASC: zero-rating subscription income
10 July 2008
The tribunal also dismissed an appeal brought by the British Association for Shooting and Conservation (BASC). BASC have zero-rated subscription income from the supply of magazines and the supply of making insurance arrangements. They contended that the remaining subscription income should also be zero-rated because it was the consideration for an exempt supply consisting of supplies to members of ‘a body which has objects which are in the public domain and are of a political, religious, patriotic, philosophical, philanthropic or civic nature.’ The VAT tribunal rejected the implicit claim that BASC’s representation of its members' interests could be said to be of a political, philanthropic or civic nature, and in the public interest.
Full case details

Budget 2008

CFDG submitted a response to the 2008 budget, and responded to the Gift Consultation, to Government's reply to which was released on the same day as this year's budget. We were proud to see our call for transitional relief for charities answered in the Government's response to the Gift Aid consultation. The Government will provide transitional relief to the sector on Gift Aid claims at a rate of 22% for the next three years, worth an estimated £300 million to the sector.

CFDG also welcomed moves to simply for the audit proceedures for charities, and extra resources to help charities understand and claim Gift Aid. We also welcomed the Government's committment to a consultation on substantial donors.

CFDG were however disappointed that the staff hire concession is being withdrawn as of 1 April 2009. Please see the Tax and VAT page for further details of our response and action in this area.

CFDG Budget Briefing
CFDG Budget Submission
CFDG and CTG press release on the budget

Current VAT issues

Staff Hire Concession
27th March 2008
In the 2008 budget the chancellor announced a withdrawal of the staff hire concession. Under the current concessionary arrangements employment businesses are allowed to exclude the wages element from the supplies they make, and to account for VAT solely on their margin. This concession affects employment bureaux who use the existing concessionary arrangements and any of their customers who are not able to fully recover the VAT charged to them, including charities.

CFDG is liasing with the Recruitment and Employment Confederation (REC) in considering options for organisations caught by this change in the legislation, and will keep members informed of any progress.
Technical note on the staff hire concession
Review of the staff hire concession: Summary of responses

Gift Aid Reform

In their response to the Gift Aid consultation the Government committed to providing the transitional relief lobbying for by CFDG, at a rate of 22% for the next three years, worth an estimated £300 million to the sector. Royal assent has been received for the finance bill, and HMRC is now authorized to pay transitional relief on all donations received on or after 6 April 2008. Charities entitled to the relief will have it paid automatically, and do not have to do anything themselves.
For more detail, see our briefing

HMRC letter on Gift Aid Rules

As you will be aware, new Gift Aid rules covering donations that attract the right of free entry to charity property took effect on 6 April 2006. HMRC have sent a letter to various charities highlighting the fact that the new Gift Aid legislation is not being adhered to and consequently some charities may be claiming repayments in respect of sums not eligible for Gift Aid.

Please find attached a copy of the letter below:
download (39kb)

Irrecoverable VAT

Last October the Charities Tax Reform Group (CTRG) launched its parliamentary campaign on VAT which has received widespread support from the charity sector as well as strong cross party endorsement. You can add your voice to this campaign by lobbying your respective MPs. The letter below highlights why VAT is a problem for charities and the activities your MP can undertake to further raise the profile of this issue. Please download a copy and send it to your MP.
download letter (13kb)

The Charity Tax Reform Group leads on charity taxation issues
www.ctrg.org.uk/home

Online petition

A petition has been launched on the Prime Minister's website calling for an end to the requirement for voluntary sector groups to pay VAT.

Please visit the petition:
petitions.pm.gov.uk/Charities