HMRC to look at charity tax anomalies

2nd November 2009

The Charity Finance Directors' Group (CFDG) and a group of Finance Directors from leading charities recently met with HM Revenue and Customs (HMRC) to discuss current taxation issues faced by charities.

HMRC approached CFDG with a request to discuss the taxation issues that cause difficulty within the sector. CFDG consulted members to identify the key problems and brought a group of representatives to meet officials from HMRC and HM Treasury.

CFDG delegates requested that sponsorship be regarded as part of the primary purpose trade of charities to avoid the need for many charities to set up a subsidiary company. In cases that were too big a request, delegates suggested an alternative option of raising the small trades exemption limit from £50,000, as this figure has not been raised in the memory of CFDG members. HMRC agreed to consider these ideas and to investigate the possibility of getting greater consistency between corporation tax and VAT rules on sponsorship and other areas of taxation.

The charities were concerned that VAT policies discourage collaboration in the sector at a time when joint working is most needed. It would help charities if they were able to find savings in the current recession by combining their back office functions, instead of becoming liable to irrecoverable VAT. This liability arises because VAT has to be charged by one charity to the other for these services. HMRC agreed to look at the issue in the light of EU legislation.

The new IXBRL filing requirements, which mean that charitable companies will have to file their documents online for the 2010 year ends, were also a source of concern for CFDG members. The lack of awareness in the sector of the requirements and the lack of time for compliance may result in a large number of charities failing to meet the deadline required. HMRC agreed to look into improving the guidance and taking into account the needs of charities.

Keith Hickey, CEO of CFDG said: “It was a positive meeting. We appreciate the willingness of HMRC to listen to our members’ experience of the problems and their desire to work with us to identify ways to address them”.

- Ends -

Notes to Editor:

The Charity Finance Directors' Group was set up in 1987 and is an umbrella group that specialises in helping charities to manage their finance-related functions.

CFDG’s circa 1,600 plus members are responsible for the finances of charities with a wide variety of income levels. Between them our members manage some £14.7 billion in charity income per year. For further information please contact our Policy Team on tel: 020 7785 6426 or email: policy@cfdg.org.uk.

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