George Osborne MP’s emergency Budget will clearly hit charities hard, with departmental budgets cut by up to 25% over four years. Here are some of the early impacts identified together with comments from the charity sector.
The increase in VAT to 20% from January 2011 will cost charities at least £140 million more in VAT, according to the Charity Tax Group.
Martin Sime, Chief Executive of the Scottish Council for Voluntary Organisations said: “The rise in VAT to 20 per cent will hit the voluntary sector in Scotland hard. The Charity Tax Group has estimated that the rise could cost the sector as much as £14 million a year at a time when governments in both Holyrood and Westminster are asking us to do more and when income from other sources is already down”.
Stephen Bubb, head of Acevo, said: “The spending cuts outlined today will impact on front-line services. The vulnerable will likely receive less support and charities will be asked to do more, and will have to do so at a time that their cost base is rising due to the VAT rise.”
NCVO has produced a summary of how the Budget affects charities.
John Low, Chief Executive of Charities Aid Foundation, said: “The increase in Capital Gains Tax (CGT) to 28 percent for higher rate tax payers could renew interest in share giving to charity. At the moment share giving is worth around £100m a year, but previous research undertaken by CAF suggests that only one in five are aware of this highly tax effective method of donating.
“Donors are able to claim relief on any donated shares at the end of the financial year through their tax return which may well result in a significantly reduced bill from the taxman. This also applies to donations of land or property made to charity. We hope that the Charity Sector seizes this opportunity to promote these methods of giving which will now become even more attractive to higher rate taxpayers.”
Louise Richards, Director of Policy and Campaigns at the Institute of Fundraising, commented: “The rise in VAT will increase costs for some areas of fundraising and mean that there is less money to spend on beneficiaries. This in turn means that there will be more pressure on fundraisers to maintain income levels and return on investment. The Institute is concerned at the effects that the increase will have across the sector and supports longstanding calls for charities to be exempt from this increase.
The Institute welcomed the 10% increase in Capital Gains Tax for the higher paid because it “could well act as an incentive for higher rate taxpayers to give more generously to charity by donating gifts of land, property or shares, in an attempt to offset their increased tax liability”.
The Social Investment Business urged the government to support its approach to funding. Chief Executive Jonathan Lewis said: “Two separate independent evaluations have found that the method we use – grants, loans and business support – is a highly effective way of making civil society organisations financially sustainable. And moreover, money that is lent is repaid with interest and can be re-lent leading to an evergreen fund”.
And you? How do you plan to fundraise through the new austerity?