Charities face further tax rises

30th October 2002

A new survey by the Charity Finance Directors' Group has revealed that a DTI proposal on Employment Agencies will cost the sector millions of extra pounds per year in tax. As a result of the proposed Conduct of Employment Agencies and Employment Business Regulations, charities which make substantial use of temporary staff will shortly be faced with a significant increase in VAT on this cost.

The CFDG survey of over 100 Charity Finance Directors, published today, revealed that as a result of the VAT implications of these proposals, a large number of charities will face increases in their irrecoverable VAT.

CFDG want charities to be compensated for the extra VAT costs of this proposal through a concession for charities similar to that which will be introduced for individuals in need of homecare.

Although CFDG welcomes the regulation, which seeks to reduce abuses and remove some barriers to labour mobility, the impact on the charity sector, which cannot recover VAT should be considered.

The Government has accepted that those groups unable to offset VAT payments against their own taxable supplies will be faced with higher costs following implementation of the new regulations.

The Government state that "the impact on this [charity] sector is likely to be negligible since agency temps are rarely used by these organisations". Our survey reveals this to be untrue. Although most of the sector does not use Agency temps frequently, many use them occasionally, and some sectors are forced due to staff shortages to make more significant use of them.

CFDG Director, Shirley Scott said today
"Although we have no problem with the regulations themselves, the Government should grant a concession to all charities to exempt them from the extra VAT they will have to pay. This extra tax burden, which comes on top of the already announced increases in national insurance, will have a massive impact on our members' ability to achieve their charitable objectives. We have to remind Government regularly that charities cannot recover the VAT they pay for goods and services."


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