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Briefing: tax relief

Irrecoverable VAT

Tax reliefs on charitable donations through schemes like Gift Aid have been very valuable to the charity sector.

However, when charities come to spend their money, the tax situation is very different. Charities have a much higher indirect tax burden than most commercial and public sector organisations. It is estimated that the burden to the charity sector of irrecoverable VAT has reached £500 million each year. For Cancer Research UK alone, the irrecoverable VAT burden is approximately £2.4 million per annum.

Solutions are needed to the problem of the indirect tax burden of irrecoverable VAT which currently affects charities disproportionately. Cancer Research UK believes that all bodies acting for the public benefit should be on an equal footing with regard to tax recovery, which is not currently the case.

National VAT legislation is ultimately dictated by EU legislation. However, this legislation does not stop the UK Government from providing refunds to charities outside the VAT system, something which has already been done in respect of National Museums and listed places of worship.

There is currently a petition on this issue on the No.10 Downing Street petitions website. Add your name to the petition here.

Zero Rates

Current developments in Europe on VAT harmonisation have threatened the existing zero-rates enjoyed by charities in this country. The potential impact of the proposed changes on Cancer Research UK would be considerable. We estimate that the total cost of losing our zero-rates would be a minimum of £13 million per annum. With an annual expenditure on research of around £200 million, the loss of these zero-rates has the potential to reduce our spend by at least seven per cent. This loss would have a serious impact on our ability to support research. The UK charity sector must not lose its vital zero-rates for VAT.