​Leading bodies call for VAT scheme to be extended while SCVO tempers this with call for targeted approach

A “targeted approach” to lifting the VAT burden on charities is being called for by the Scottish Council for Voluntary Organisations (SCVO) – after six leading umbrella bodies called for a VAT rebate scheme to be extended.

The government introduced VAT rebates for hospices, search and rescue charities, and air ambulances in last autumn’s budget statement.

Chief executives of the Charity Finance Group, NCVO, Institute of Fundraising, Navca, the Association of Charitable Foundations and the Small Charities Coalition have written to George Osborne, Chancellor of the Exchequer, to make the case for extending the scheme to the whole sector.

However, John Downie, SCVO director of public affairs, said the call came at a time when government financial support for the sector is being squeezed.

We support a targeted approach for now which prioritises rebates for independent charities - John Downie

As such the body did not favour a blanket refund scheme that “gives as much priority to refunding arms-length government charities and quangos (such as universities and council-formed leisure trusts) as to the rest of us.”

He added: “We support a targeted approach for now which prioritises rebates for independent charities such as hospices, search and rescue, and hopefully health and care services in the near future.”

The letter to Osborne from the six umbrella bodies states: “Estimates vary, but the cost of irrecoverable VAT could be up to £1.5 billion a year – money which is being spent by charities to deliver public benefit.

“Charities are having to operate in a tough financial environment with income, particularly from government, being squeezed.

“This makes having an effective system of tax reliefs for charities even more important.

“By removing tax barriers for charities, the government could free up hundreds of millions of pounds that could be directed towards charitable objectives – helping people at home and around the world.”

They also call for government to bring forward the review of the Gift Aid Small Donations Scheme, due in 2016, and ask for a review into corporate gift aid to consider whether charities should be able to claim the tax relief rather than companies.