Lord Chelwoodasked Her Majesty's Government:
Whether tax relief for charities is consistent with European Community regulations and if so whether they will introduce this or other measures, such as zero rating, to offset the burden of VAT.
§ The Parliamentary Under-Secretary of State, Department of Transport (Lord Brabazon of Tara)The UK's ability to introduce relief for direct taxes paid by charities is not constrained in any way by EC law. But under EC law, the Government has no power to introduce significant new zero rates of VAT, and therefore cannot introduce a general zero rate for supplies to charities. So far as VAT is concerned, charities will be affected by the judgment of the European Court of Justice published on 21st June which found certain UK zero rates to be contrary to EC law. The Government intend to consult interested bodies, including charities, before any decisions are taken on how best this judgment can be applied in practice.