§ Annabelle Ewing
To ask the Chancellor of the Exchequer what plans he has to introduce VAT recovery relief for charities. 540W
§ John Healey
Charities benefit from special VAT zero rates and exemptions worth around £200 million a year. However, long-standing formal agreements with our European partners mean there is no scope to extend the range of these reliefs or introduce any new ones.
The Government recognise the valuable contribution that voluntary groups and charities make in delivering services, and realise that the question of irrecoverable VAT provides difficulties for some charities. The Review of Charity Taxation looked carefully at the problem of irrecoverable VAT and concluded, for reasons of principle and affordability that no changes should be made. In response to representations during the recent Cross-Cutting Review of the Role of the Voluntary and Community Sector in Service Delivery, the Government considered the issue afresh to determine once and for all whether the obstacles presented by irrecoverable VAT could be overcome. Having considered all the options available, including a targeted compensation fund, the Government concluded that no fundamental change should be made to the way the VAT system operates and the available resources would be better deployed through the new investment fund, futurebuilders'. This is a one-off £125 million investment, over the three years of the 2002 Spending Review. specifically to assist voluntary and community sector service-providing organisations in their public service work. The Treasury is leading on the design of luturebuilders' in close co-operation with the voluntary and community sector, and the Government intend to conduct wide consultation between April and June this year.