Former Inland Revenue chair to lead NCVO tax review group

Sir Nicholas Montagu will lead the umbrella group’s Charity Tax Commission, which will include five other commissioners and is set to review the tax system as it affects the sector

A former chairman of the Inland Revenue will lead a group set up by the National Council for Voluntary Organisations to make recommendations to government on how it might reform the charity tax system.

Sir Nicholas Montagu, who chaired the Inland Revenue between 1997 and 2004, shortly before it merged with HM Customs & Excise to become HM Revenue & Customs, will lead the NCVO’s Charity Tax Commission, the umbrella body has announced.

The commission, which was announced earlier this year, will carry out a full review of the charity tax system and the estimated £3.7bn worth of charity tax reliefs, then submit recommendations for reform to the government.

Montagu will be supported by five commissioners who have experience of the charity sector or fiscal policy.

They are: Sarah Atkinson, director of policy, planning and communications at the Charity Commission; Dan Corry, chief executive of the think tank New Philanthropy Capital; Pesh Framjee, head of not-for-profits at Crowe Clark Whitehill and a special adviser to the Charity Finance Group; Clare Pelham, chief executive of the Epilepsy Society; and Lynne Oats, professor of taxation and accounting at the University of Exeter Business School and co-director of the university’s Tax Administration Research Centre.

The Treasury and HM Revenue & Customs will also attend the commissioner as observers, and another commissioner might be announced shortly, the NCVO said.

The commission will meet for the first time later this week and should complete its work in the next 18 months, with the aim of informing the Inquiry Into the Future of Civil Society, which is chaired by Julia Unwin and is expected to report in 2019.

The tax commission is the first comprehensive review of charity tax since 1997, according to Montagu.

“My aspiration is for the commission’s proposals to inform future changes to the tax system such that it can continue to support charities’ work as effectively as possible,” he said.

“I look forward to drawing up pragmatic proposals that will appropriately balance the need for a fair and efficient tax system with the important role that we want charities to continue to play in society.”

In response to the NCVO’s announcement, Caron Bradshaw, chief executive of the CFG, said: “This commission comes at a critical time for our sector and carries a heavy weight of responsibility. We believe the commission should ensure that the proposals it puts forward deliver significant positive change for charities.

“We urge it to be brave and bold; now is not the time for tinkering. We have long argued that the tax bill for our sector is too high, and we look forward to hearing how the commission proposes this burden can be reduced.”

John Hemming, chair of the Charity Tax Group, said the commission “offers a further opportunity to challenge the anomalous tax position charities often find themselves in, particularly in respect of VAT”.

He said: “It is essential that charity tax reliefs keep up with societal and technological developments, or they may become obsolete. We look forward to working with the commission and recommend that future-proofing tax reliefs for charities be one of its major areas of focus.”

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Think tank urges wide-ranging review of charity tax reliefs

New Philanthropy Capital wants ministers to examine what happens to the £4bn of charity tax breaks the sector gets each year

The think tank New Philanthropy Capital has called for a wide-ranging review of charity tax reliefs to make them work better for the voluntary sector.

NPC has today urged the government to examine where the near £4bn generated each year in charitable tax relief and the extra resources it generates goes in the charity sector and whether it can be improved upon.

The think tank said any review should be revenue-neutral and not used to cut financial support to the sector.

The charity sector received about £4bn in tax reliefs in the 2016/17 financial year, with Gift Aid and business rates relief accounting for £1.28bn and £1.87bn respectively.

VAT reliefs are worth £400m to the charity sector and stamp duty land tax reliefs are worth approximately £220m, according to figures provided by NPC.

Individual people also get charitable tax reliefs, with inheritance tax reliefs worth £840m in 2016/17 and the higher-rate relief on Gift Aid worth £520m.

Other charitable reliefs include payroll giving, social investment tax relief and gifts of shares and property.

Dan Corry, chief executive of NPC, said: “As politicians return to Westminster, they need to look at how they can best use resources to support a strong and thriving civil society. We think that a review of the £4bn or so of tax breaks currently on offer is an important part of this process.

“NPC spends a lot of time urging individual charities to look hard at the way they allocate their resources to see if they maximise impact. It is only right that government should do the same.”

The call comes after NPC wrote an open letter to the political parties before the general election that set out the case for strengthening the charity sector, including moving the Office for Civil Society to a “cross-cutting department” such as the Cabinet Office.

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Private schools ‘will save £522m in business rates tax relief in next five years’

According to the business rates firm CVS, 586 of 1,038 private schools in England and Wales have charitable status and are therefore entitled to 80 per cent mandatory business rates tax relief

Charitable private schools will save £522m on business rates over the next five years because of their charitable status, according to new research.

The figures are based on requests to 132 councils made under the Freedom of Information Act by the business rates firm CVS, which found that 586 out of 1,038 private schools in England and Wales had charitable status and were therefore entitled to the 80 per cent mandatory business rates tax relief.

All charities are entitled to the 80 per cent relief from business rates, with a further 20 per cent available on a discretionary basis.

CVS also analysed government figures on private schools and found that 2,707 properties were classified as private schools.

These schools had a combined rateable value of £386.6m based on the last property assessment in 2010, but this has since risen by 19.6 per cent to £462.5m, CVS said.

CVS estimated that private schools could pay almost £1.2bn in business rates over the next five years if the business rates revaluation were to take place, but their charitable status meant that this figure would fall to £634.3m. 

CVS also released the figures for some well-known private schools that will save substantial sums over the next five years because of the business rates exemption.

For example, Eton College, which was attended by the former Prime Minister David Cameron, will pay £821,040 in business rates over the next five years, but would face a bill of £4.1m over the same period if it were not a registered charity.

Dulwich College in south London, which was attended by the former Ukip leader Nigel Farage, will pay £786,752 in business rates over the next five years, compared with a potential tax bill of £3.9m if it did not have charitable status, according to CVS.

Waverley Borough Council in Surrey grants the highest amount of business rate relief to private schools, the research shows, with five London boroughs also making the top 10.

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