NCVO's charity tax commission has launched a 16-week consultation seeking views on potential reforms to the tax treatment of charities.
Charities, donors, academics, think tanks, representative bodies, accountants, philanthropy and financial advisers and tax professionals have until 6 July to respond, during which time the commission will also be holding a series of public evidence-gathering meetings across the UK.
The commission will review all taxes and tax reliefs that charities and donors are subject to including business rates relief, social investment tax relief, Gift Aid, VAT exemption and inheritance tax relief.
The commission is also seeking views on ways to increase transparency without significantly increasing the administrative burden on charities.
Charity tax reliefs are estimated to be worth £3.77bn a year, mostly from business rates relief, gift aid and VAT relief, while reliefs for individuals are worth £1.47bn.
The last comprehensive review of charity taxation and reliefs took place over 20 years ago.
‘Be realistic’
Commission chair Sir Nicholas Montagu, who chaired the Inland Revenue between 1997 and 2004, wrote in a blog published today that the commission would not be making “unrealistic recommendations to government which are either politically or economically unachievable”.
He said: “We need to make practical, evidence-based recommendations that will be taken seriously by policymakers, focused on increasing the effectiveness of the spend that goes on current reliefs.
“That’s why we’ve asked people responding to the call for evidence to demonstrate how ideas for reform keep within current spending by indicating where else in the system savings or efficiencies could be found to allow expenditure in other areas.
“We are particularly interested in views on how far the current system of charity taxation succeeds in benefiting beneficiaries and what, if anything, needs to change to create maximum public benefit.
“We are also keen to hear whether people think the current system is successful in channelling the activities and behaviour of charities in the right direction.
“In addition to getting opinions about the various tax reliefs currently available to charities and the areas of taxation that impact on the sector’s work, we also want to know what people think about the principles that underpin the tax treatment of charities.
“For example, to what extent should tax reliefs be used to support charities to provide public services, to promote certain values such as voluntarism, or to encourage donations.
“Or do fiscal privileges amount to a grant of public money without democratic control and represent an inappropriate forgoing of tax by the exchequer?”
More details about the call for evidence including how to respond can be found here.
The commission plans to put recommendations to the government in spring 2019.
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