With pressures mounting for UK charities as the cost-of-living crisis escalates, accountancy firm HW Fisher is calling on the government to bring in tax reforms to help.
The suggestions are:
- Increase gift aid – To combat the decline in donations, the government could raise gift aid to 30% for a set period of time. This would be particularly beneficial for public services that the government already relies on – including charities that support the NHS and food banks.
- Bring in a Domestic Reverse Charge – Charities could self-account for VAT at 5% if they are VAT registered. If not, a rebate scheme could be introduced, similar to a scheme that is already set up for listed places of worship.
- Introduce an energy cap – Currently energy caps only apply to domestic households. The government could defend the energy bills of charities by extending this cap to charity owned facilities and buildings.
- Raise tax-free mileage for charity workers – Petrol prices are at an all time high and the current tax-free mileage rate needs to be adjusted in line with inflation
Recent CAF research revealed widespread concerns among charity leaders, with 59% concerned about people having less money to donate to their cause, and 71% worried about managing an increase in demand on their services. 82% of charity leaders are also concerned about the increased cost of utilities and 35% about their organisation struggling to survive.
Russell Nathan, Senior Partner at UK accountancy firm HW Fisher, said:
“At what is already a difficult time for charities, they also face a number of outdated, overlooked and in some cases unclear UK tax policies. This includes stealth taxes, unfair VAT clauses in government contracts, distortion of competition against local authorities and the lack of a Brexit dividend.”
“The Government must learn the lessons of previous recessions. The financial crash in 2008 and the subsequent recession had a significant impact on charitable donations, and the aftermath of the Covid pandemic will be the same. We also know that not all charities will be affected equally, and so it is important for the Government to introduce measures that will support all charities operating in the UK.
“We understand that not all of these changes can happen at once – but small changes can have the potential to make a big difference. In many cases, a simple review of policies that are already in place and adjusting them to better reflect today’s economic environment would have a significant impact for charities that are struggling.”