CTG press release: 24/11/08

The Charity Tax Group (CTG) welcomes the temporary 2.5% cut in the standard rate of VAT announced by the Chancellor in his Pre-Budget Report today (24 November 2008). 

The Group estimates that this will save the sector around £70 million a year. Cancer Research UK will save £850,000, the RNLI will save £200,000 and Action for Blind People will save £100,000. 

However, the Group is concerned at the proposed permanent increase in National Insurance contributions from 2011. The charity sector is very staff intensive and the impact will offset the benefit of the VAT reduction. For instance, Cancer Research UK is likely to lose £500,000 a year if this proposal goes ahead. 

Helen Donoghue, Director of the Group, said “The reduction in VAT will be a very welcome temporary boost to charities at what is a very difficult time. Given that charities will still be facing an irrecoverable VAT bill in excess of £400 million a year, we would like to see the introduction of a permanent compensation package for charities to be introduced in 2010. 

We are encouraged that the Government is still looking at improving the Gift Aid system but we are disappointed that there was no early announcement about repealing the substantial donors legislation, which is causing some charities to turn away significant donations.” 

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Note to editors: The standard rate of Value Added Tax [VAT] will drop from 17.5% to 15% for 13 months, from 1 December 2008 until 1 January 2010.