Charity Finance Group calls for joint working party on VAT post-Brexit

In its submission to the Chancellor before the autumn Budget, the group says government and charities could work together to bring in a rebate scheme

The Charity Finance Group has called for a joint government and charity sector working party to decide how the VAT system should operate after Brexit.

In a submission to the Chancellor of the Exchequer, Philip Hammond, before the autumn Budget, which will take place on 22 November, the CFG says there are some “significant opportunities” for charities from Brexit, in particular in charity tax, and that the government should “lay the foundation for a stronger charity sector”.

Irrevocable VAT costs the charity sector approximately £1.5bn a year, which is equivalent to £9,204 for every charity in the UK, the submission says.

The European Union currently sets rules on VAT zero rates, but the CFG’s letter says that on departing the EU the government could help charities by phasing in a rebate scheme to allow VAT incurred on non-business income to be reclaimed over five years.

This could be supplemented, it says, by converting existing VAT exemptions into zero ratings or “options to tax”, which would allow charities to recover VAT.

These two proposals could save the charity sector 90 per cent of its current VAT tax burden, the submission says.

“The impact of VAT reform would be transformational to the UK charity sector, not only reducing the amount of time spent focused on structuring activities in such a way as to avoid large VAT bills and paying for advice, but also in freeing up hundreds of millions of pounds to be spent on helping advance good causes,” it says.

The CFG is also calling for charities to be exempt from paying insurance premium tax – a tax on general insurance premiums – and for business rate relief for charities to be increased, including a target to create 100 per cent rate relief by the end of this decade.

The CFG’s letter come after a submission last week from the National Council for Voluntary Organisations, the charity chief executives body Acevo and UK Community Foundations that called on the government to create a successor to the European Social Fund.

The ESF provides European investment for social issues, such as improving skills and training and reducing inactivity among young people and the long-term unemployed. Charities receive approximately £300m a year from the ESF.

The joint submission said that the government had an opportunity to keep the best aspects of the ESF while reducing the scheme’s bureaucracy.

The £1bn in dormant assets the government’s Commission on Dormant Assets recently uncovered should also be used to strengthen the charity sector, the joint submission said, including allowing communities to purchase local amenities and assets, such as village halls or pubs.

The Association of Charitable Foundations has also backed both of the NCVO’s proposals in a separate letter to the Chancellor.

The Charity Tax Group also used its submission ahead of the Budget to call for an improved VAT system, reform of Gift Aid donor benefit rules, reducing tax burdens on the charity sector and making charities’ trading subsidiaries exempt from HM Revenue & Customs’ Making Tax Digital programme.

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Local finance infrastructure needs more support to help small charities, says CFG

A report from the Charity Finance Group says there is a big gap between what small charities need and the capacity of accountancy and support providers

Local finance infrastructure needs more support to meet the needs of small charities, a report from the Charity Finance Group has concluded.

The report, which concentrates mainly on the state of small charity accountancy and support service providers, says there is a significant gap between the needs of small charities and the capacity of accountancy and support providers.

The report says that many small charity finance services will struggle to expand to meet growing demand for their services, and the number of accountancy and support service providers has fallen nationally.

There are also challenges in communicating which services are available to small charities and a lack of resources to help small providers keep up to date with developments in complex areas such as tax, the report says.

National bodies could do more, it adds, to meet the needs of these support providers, including promoting better collaboration between them.

The weakest areas for accountancy and support services highlighted in the report are the Midlands, the south east and London, whereas Yorkshire has the strongest area of provision.

The report also highlights skills-based volunteering, digital support and building communication channels to promote services to small charities as ways in which local infrastructure can be helped.

It says ocial investment could be used to help these organisations, recognising the impact they have on the sector while simultaneously realising that it will take time to grow successful business models.

Andrew O’Brien, head of policy and engagement at the CFG, said: “Local infrastructure bodies are the backbone of our sector, providing critical support that enables smaller charities to do their work. The past few years have been challenging for support providers, as it has been for the sector as a whole. But the importance of financial advice and support has never been greater, given the environment in which small charities are operating.

“There are a number of measures that can be taken to support these vital organisations, but it requires a partnership between providers, foundations and government. The CFG will continue to do what we can to help boost the support available to these organisations so that they can, in turn, help small charities to thrive.”

The report was produced as part of the CFG’s small charities programme, which has been supported by funding from the Esmée Fairbairn Foundation.

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Former head of finance at Cyrenians Cymru jailed for five years

Robert Mark Davies, 50, defrauded the now defunct charity of more than £1.3m over six years, causing it to go into administration in 2015; 75 staff lost their jobs

The former head of finance at a now defunct Welsh homelessness charity has been jailed for five years for defrauding the charity of more than £1.3m in order to buy expensive holidays and boats.

Robert Mark Davies, 50, was sentenced at Cardiff Crown Court on Friday after pleading guilty on 18 April to one count of fraud by abuse of position during his time as head of finance at Cyrenians Cymru.

Davies’s fraud, which was worth £1,343,074 over six years, caused the charity to enter administration in 2015.

Davies was dismissed from the charity, which was based in Swansea, in 2014 and was arrested the same year after an investigation by South Wales Police’s economic crime unit.

The charity, which had an income of £2.2m in the year to the end of March 2013, employed 75 staff.

Detective Sergeant Stuart Prendiville of South Wales Police said: “Davies abused both his position as an employee of Cyrenians Cymru and his responsibility to safeguard the financial interests of this organisation.

“Davies stole in excess of £1.3m from the charity over a six-year period, which he used to fund a lavish lifestyle including extravagant holidays and the purchase of several boats. This ultimately was a factor that led to the charity becoming insolvent and the tragic loss of a number of support services provided to the homeless and vulnerable people of Swansea.”

The boats have been seized by South Wales Police and will be sold as part of proceeds of crime confiscation proceedings.

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Charity Finance Group launches Counter Fraud Pledge

The Charity Finance Group is calling on charities to take a pledge aimed at reducing fraud in the voluntary sector.

The umbrella body said charities could not be completely immune to fraud, but they could take steps to minimise the risks and reduce the estimated £1.9bn a year the sector loses to it.

The Counter Fraud Pledge focuses on six promises, including that each signatory will create fraud policy, assess each year how well the policy is working and appoint a key person to be responsible for fraud.

Organisations that sign the pledge will be able to use a badge on their website to show people that the charity is doing what it can to protect its assets.

Heather McLoughlin, policy and public affairs officer at the Charity Finance Group, said fraud was one of the biggest challenges facing charities.

She said that although many charities had robust counter-fraud policies, others were still grappling with the issue.

“Our hope is that the Counter Fraud Pledge will increase awareness of fraud and how to tackle it,” she said.

“We also believe it will demonstrate to beneficiaries, funders and the people who support and donate to charities, that charities do take the threat seriously and are actively working to safeguard their organisations’ assets and reputation.”

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