In early January, John Hemming, Head of Tax at Wellcome Trust and chair of the UK Charity Tax Group, informed UK MPs that charities should be automatically exempt from taxes, unless parliament legislated to include charities in specific taxes.

This would help prevent unfair taxes being levied on the sector, including irrevocable VAT. Hemming also stated that anti-tax-avoidance legislation, though generally a good thing, was affecting charities’ income. He called on the government to stop making charities “collateral damage” in the war against tax avoidance. With regard to VAT taxation he stated that “we are not the end consumer” and “all charities provide a service to the community, either individually or in a broader sense…we cannot be avoiding tax. We have no tax motive to do so.”

The Charity Tax Commission will now seek to make realistic proposals for reforming charity tax law. The Commission will launch a consultation and hold public meetings across the country to gather evidence before publishing recommendations. “Government pronouncements about fiscal policy have rather lacked a long-term vision for the sector, and we hope that our work might help to inform such a vision said Chair of the Charity Tax Commission, Sir Nicholas Montagu, a former chair of the Inland Revenue, the predecessor of HM Revenue & Customs.

More details are available from UK Third Sector magazine.