Reforming charitable tax reliefs

This is a guest blog by Sir Nicholas Montagu, Chair of the Charity Tax Commission. 

On 27th June, BVSC is hosting an open session on behalf of the Charity Tax Commission and NCVO for all interested stakeholders. BVSC Chief Executive Brian Carr will chair the event. It’s a free event – sign up here.

Charities are a key part of the UK’s economy. In 2015/16 the National Council for Voluntary Organisations (NCVO) estimated that charities contributed £15.3bn to the UK economy, around 0.8% of total GDP and equal to the GDP of Estonia. But it isn’t a one-way street: every year the tax system gives nearly £4bn to charities in tax relief, over and above the public money they get in the form of grants or contracts.

This presents an interesting question about where and how government money does and should go to charities. Here’s a good one to start with:

‘Should any public money at all go to charities, except where they directly provide public services?’

Some people might argue the money would be better spent on the NHS or schools. Personally I think that the government should continue to support charities, but I do believe we need to take a hard look at them and where all that public money goes.

A prime candidate for a fresh look is the £3.7 billion of tax reliefs that charities receive each year. The last time they were reviewed was 20 years ago, when I was Chairman of the Inland Revenue. They can be a powerful tool in promoting socially beneficial behaviour and worthwhile causes.

But 20 years on we need to ask ourselves whether the reliefs, and the big chunk of public revenue that they represent, could be more effectively channelled to help charities and their beneficiaries.

We need a clearer understanding of where this and the other public money goes and how far it is effective in getting help to charities and their beneficiaries.

And are the right charities benefiting? Maybe we should challenge that indiscriminate approach and start asking the awkward questions about whether there might to be more to show for the money if we distinguished between charities. There are all kinds of possible ways: size, purpose, demonstrable impact, geographical location and a whole lot more.

It was because I wanted to get a fresh and radical look at these thorny issues that I readily accepted the invitation to chair an independent Charity Tax Commission to undertake a full review of the charity tax system.

The commission has been established by, but is entirely independent from, the National Council for Voluntary Organisations, the charities’ representative body. We’ve got a small and diverse group of talented commissioners, supported by expert advisory groups, and we’re currently seeking views from anyone who wants to have their say on how effective the current system of reliefs is, and how it could be made smarter.

We’ve issued a call for evidence, and we’ll be holding some open sessions around the country to give people a chance to air their views. We want those views to range widely and be visionary.

Everyone has an interest in the health of our society, and charities are vital to it. So, we want people to make their voices heard—it could be another 20 years before they get the chance again.

Learn more and have your say:

On 27th June, BVSC is hosting an open session on behalf of the Charity Tax Commission and NCVO for all interested stakeholders. Members of the commission will be in attendance and the event will be chaired by our chief executive, Brian Carr. The event is free, and you can sign up here:

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