New Forest

31/10/2019

Charity Tax Commission report

In July the Charity Tax Commission published a report setting out areas where reform of the tax system could be made for the benefit of the charity sector. Established by the NCVO and led by a former chairman of the Inland Revenue, the commission’s proposals aim to boost charities and unlock a wave of giving. Short-term proposals made by the Commission that could be introduced include:

  • The reform of Gift Aid, with the value of additional and higher rate tax reliefs directed to charities in addition to the current 20% basic rate tax relief. This reform alone could be worth as much as £250 million to the charity sector.
  • The launch of a Universal Gift Aid Declaration Database, a single, enduring declaration that individuals can make covering all future charitable gifts, that would reduce the administrative burden on charities when operating the Gift Aid Scheme.
  • Making it mandatory for employers to offer Payroll Giving, to encourage greater uptake of this form of charitable giving.
  • Simplification of VAT rules affecting charities, including ways to reduce the amount of VAT levied on the goods and services provided to charities that they are unable to recover, and the disparity in VAT treatment between grants and contracts.
  • The removal of VAT from wills that include a charitable donation in order to encourage the potential of legacy giving.
  • The extension of business rates relief to wholly-owned trading subsidiaries of charities.
  • Greater transparency in the annual reports of charities about the money they receive from tax reliefs.

The Charity Tax Commission is also advocating longer-term proposals for a comprehensive review of Gift Aid, VAT and business rates relief to ensure that they adapt to the changing ways that charities deliver their services in the 21st century.

Of course there is no guarantee that these proposals will ever make it into law, but with a potential change in government in the next few months it is hoped that the time is right for reform of charity tax.

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