The National Council for Voluntary Organisations (NCVO) recently established an independent Charity Tax Commission to undertake a full review of the impact of the tax system on charities.
The commission is being chaired by Sir Nicholas Montagu former chair of the Inland Revenue, who has published his thoughts in a ‘guest blog’ for BVSC. It makes for a concerning read. The argument presented hints strongly a threat to the tax relief enjoyed by charities and the crux of the argument is built in on the statement:
“every year the tax system gives nearly £4bn to charities in tax relief …… this presents an interesting question about where and how government money does and should go to charities.”
This strikes me as terminally flawed, implying, as it does, that no having to pay money is the same as receiving a donation.
A person who earns less than £11,500 does not pay tax, is the Government ‘giving’ them 20% of what they do earn? A business that turns over less than £85,000 is not required to pay VAT, is the Government giving the customers of that business 20% of what they pay for goods or services obtained there? If I park my car in Knowle for 4 hours on a weekly afternoon, I must pay £2, but if I go for 4 hours after 6pm it is free, is that then Solihull Council putting two pounds into my pocket. I think not!
It becomes clear from the remainder of the piece that there are concerns about the ways in which some charities do charities and whether this is tantamount to abuse of the tax relief privilege. Few of us would argue with that. There are charities, mostly better known ones, which spend monstrous sums on branding, marketing and fundraising and leverage insufficient value from that expenditure. But that is not the norm.
Where there is abuse, the answer should be better regulation to penalise the guilty, not withdrawal of a beneficial concession that affects the innocent as well.
There is no question that, as a result of diminishing availability of grants and reduced generosity of the public in fundraising, a majority of, particularly small, charities have finances which sit on a knife edge and they turn income into social value with great effect. The imposition of a tax burden is likely to push a significant number over the edge.
It may be, of course, that Mr Montagu’s blog is setting out a controversial argument deliberately in order to provoke response. I would say that, if so, that would be an unworthy tactic, likely to cause unnecessary angst in a sector that is already under strain.
Whatever the motive, we should robustly defend charity tax reliefs through the consultation processes.