Charities: VAT

Baroness Royall of Blaisdon Excerpts

Thursday 13th January 2011 Lords Chamber

Asked by

[Baroness Royall of Blaisdon]

To ask Her Majesty’s Government what steps they will take to allow Sue Ryder Care and other charities to recover VAT in the same way as other bodies providing public services.

[The Commercial Secretary to the Treasury (Lord Sassoon)]

My Lords, although local authorities, government departments, the NHS and certain other public bodies incur irrecoverable VAT, just as many charities do, on certain of their activities, it is the case that a small number of VAT refund schemes operate in the public sector. Charities already benefit from a range of tax reliefs and it is not proposed to introduce any general VAT recovery scheme for the sector.

[Baroness Royall of Blaisdon]

My Lords, I thank the noble Lord for his Answer and for the information that he provides. I understand that this is a long-standing problem, but it has been exacerbated by the rise in VAT to 20 per cent. Does the noble Lord agree that in the context of charities such as the excellent Sue Ryder Care, whose centre in Leckhampton I know well, being asked to provide additional public services as part of the big society initiative, some solution should be found to ensure that there is a level playing field between charities, local authorities and the NHS, when all are delivering the same or similar public services?

[Lord Sassoon]

My Lords, I certainly take the opportunity to commend the work that Sue Ryder and many other charities do. They are facing a tough time, as are many parts of society. We find ourselves in the regrettable situation that charities will be bearing the additional VAT. The whole of society is bearing the burden of the difficult decisions on deficit reduction. The charitable sector of course benefits from significant VAT and other tax reductions and exemptions to the tune of £3 billion a year. The question of a level playing field is important, but it is of a level playing field with the public sector, which itself cannot recover all its VAT. For example, in the National Health Service, only about 20 per cent of the irrecoverable VAT is refunded, and only on outsourced services. Equally, we must remember that there are commercial providers of social care and other services who would be disadvantaged if there was a special scheme for charities.