Budget 2012 must address the operating environment for charities says CFG

29th February 2012

Charity Finance Group is calling on the Government to improve the financial operating environment for charities in Budget 2012.

Improving the financial, tax, and regulatory environment for charities to ensure they can make the maximum contribution to economic growth and to advance the well-being of the UK population is a priority for CFG.

Focussing on the issues of key concern to finance professionals in the sector, CFG highlight several important areas for the Government to address. This includes the issue of irrecoverable VAT for charities and problems associated with Section 75 of the Pensions Act that have significant negative consequences for charities in multi-employer defined benefit pensions schemes.

Caron Bradshaw, CFG’s CEO, said; “As a significant contributor to the UK economy, the strength and sustainability of the sector is essential. If the Government is to deliver in developing civil society as well as new public service delivery markets and social investment structures, then it is essential that the operating environment is fit for purpose. At the moment charities find themselves at a disadvantage in too many aspects of their work.

For example, the employer debt regulations and ‘last man standing’ rules in Section 75 of the Pensions Act are penalising charities, trapping them in unaffordable pension schemes and blocking them from adapting. Negative consequences of legislation such as this are not acted on fast enough.”

In its submission, CFG has also:

  • Called for more support for charities to avail of social investment.
  • Raised the issue of trading limits for charities which impact on their ability to make use of trading models for raising funds. In particular, highlighting that the limits on non-primary purpose trading force many organisations to create bureaucratic trading subsidiaries, which often bring few other advantages.
  • Brought to light some of the costs associated with the requirement for returns to be submitted to HMRC in iXBRL format.

Caron added; “iXBRL has cost CFG members anything between £150 to £8,500 in charitable funds, depending on the number of documents they need convert and the complexity. It is costing far more than this in professional time taken to solve the problem. This is all money being spent to submit what is, in most cases, a nil tax return – offering no advantage to HMRC. This has also disproportionately hit smaller charities who have had to pay to have their trading subsidiaries accounts out into iXBRL as trading subs fall outside of the small charities exemption for this.” 

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Notes to editors:

1. CFG is the charity that champions best practice in finance management in the voluntary sector. With more than 1,750 members, managing over £19bn, we are uniquely placed to challenge regulation which threatens the effective use of charity funds. Our training and development programmes enable finance managers to give the essential leadership on finance strategy and management that their charities need. For more information, please see www.cfg.org.uk

2. CFG's full budget submission can be found here.

3. CFG was also a signatory on a joint sector-led submission to the Budget 2012 which can be found here.

4. CFG wrote to the Minister for Pensions, Steve Webb MP and the Minister for Civil Society, Nick Hurd MP, in February 2012 in order to highlight the issues associated with Section 75 of the Pensions Act. A copy of the letter can be found here.

If you would like more information, please contact CFG policy and public affairs officer Katherine Smithson at katherine.smithson@cfg.org.uk or on 0207 250 8347.

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