They voted by 310 to 183 against a lifeline amendment
MPs have knocked back a bid to exempt small charities from the impending hike in employer National Insurance contributions.
Members in the House of Commons removed an amendment that would have provided organisations with an annual revenue of less than £1 million relief from the rise, which is expected to devastate the sector.
The House of Lords last month accepted an amendment to the National Insurance Contributions (Secondary Class 1 Contributions) Bill that would put in place the exemption.
But the amendment was blitzed by Commons MPs this week.
Even Tory MPs, a group that has often been at odds with the voluntary sector in recent years, backed the exemption.
Gareth Davies, MP for Grantham and Bourne, said the NI increase would “force charity staff and volunteers across the sector to raise £1.4 billion more to cover this tax rise next year alone”.
He said: “Supporting this Lords amendment would prevent so many services provided by the third sector from being reduced, or even removed altogether.”
Luke Evans, the Tory MP for Hinckley and Bosworth, told the house that charities faced having to reduce their services as a result of the NI increase.
He said: “After yesterday’s announcement about benefit changes and benefit cuts, the government has said that they want more people to go into work.
“A lot of help to get people into work is delivered by charities, so we are expecting a greater need for such charities. How will they cope if they are being taxed through further National Insurance contributions?
“They will have to reduce their services and their ability to provide support, so there will be a gap in the market. Will the minister explain how the government intends to bridge that gap?”
However, James Murray, the exchequer secretary to the treasury, said that backing the amendment would be tantamount to “support for higher borrowing, lower spending or other tax rises”.
Murray, in removing the amendment, said “many of the elements of support for charities in the tax regime remain generous”.
He said: “There was £6bn for tax relief for charities and their donors in the tax year to April 2024 through features that will continue in the tax year that we are entering.
“The employment allowance is more than doubling from £5,000 to £10,500, which will benefit all charities in this country.
“Charities, particularly small charities, will benefit directly from changes that we have made to the employment allowance.”
MPs voted by 310 to 183 against keeping the small charities amendment.
Richard Sagar, head of policy at the Charity Finance Group, expressed disappointment after the amendment fell, saying: “Peers set out a full and fair case for the exemption of charities under £1m and rightly expressed their concerns with the government’s rise in National Insurance Contributions.
“Many small charities deliver essential support for people across the country, and many of them will now be faced with a difficult decision regarding cuts to these services, which will in turn impact greatly on those who need them.”
