Charities: VAT

Lord Lawson of Blaby Excerpts

Thursday 13th January 2011 Lords Chamber

[Lord Sassoon]

I reiterate that it is important that we recognise that there are significant benefits within the VAT system for charities and that we have exemptions from the general EU rules on VAT that are not enjoyed by charities anywhere else in Europe. It is also the case that other proposals for increases in taxes would have hit charities significantly higher. If, for example, the previous Government’s proposals on increases in national insurance contributions had not been reversed by this Government, there would have been a significantly higher burden on charities than the regrettable increase in the level of irrecoverable VAT. I do not think that we should take this issue in total isolation.

[Lord Lawson of Blaby]

Does the Minister agree with the principle that I set out when I was Chancellor that if one wishes to encourage charities through the tax system, which I approve of, it should be through concessions for charitable giving, not through relieving particular charities from tax?

[Lord Sassoon]

I agree that tax relief related to charitable giving is a critical part of the piece. Indeed, gift aid is running at some £1 billion a year and is a very successful and important scheme.