Impact of taxation on charities

The Charity Tax Group has published the first ever comprehensive study of the impact of taxation on charities.

The Charity Tax Map was funded by the Nuffield Foundation and offers a comprehensive study of the interaction between the tax system and the voluntary sector, as well as detailed case studies of individual charities.

The Charity Tax Map:

Gives charities details of the 18 different taxes to which they could be subject
Looks at the associated compliance requirements
Identifies the various tax reliefs available to charities
Sorts the taxes and reliefs according to the activities charities undertake in a unique Charity Tax Map matrix
Presents a study of the cost and impact of taxation on the sector informed by a survey of sample of different types and sizes of charities that is representative of the sector as a whole
Provides twelve detailed case studies outlining the particular impact of tax on the individual charities
Provides charities with a valuable tool to ensure they know which reliefs and taxes apply to them
Helps charity trustees assess when they need to take professional advice.

Key findings of the Charity Tax Map show:

That the number of taxes and the extent of their impact on any particular charity will depend entirely on the size, scope and activities undertaken by that charity
That the compliance burden faced by charities in administering taxes often seems disproportionate to the taxes collected
The diversity and complexity of charity taxes, reliefs and related compliance that would benefit from simplification.

John Hemming, Chairman of CTG, said:

“The Charity Tax Map navigates charities to the reliefs to which they are entitled. It will also ensure that they are fully aware of all the tax responsibilities their charity faces. By revealing the full extent of the tax burden on charities, we hope that the Government will take steps to simplify parts of the tax system and its processes”.

Professor Cathy Pharoah, Co-Director Centre for Charitable Giving and Philanthropy, Cass Business School, who supervised the analysis of the findings, said:

“The research has shown how very difficult it is for charities to compile an accurate picture of tax and compliance costs. Data gathered so far indicates a range of cost that is mainly related to what charities do and not to their structure. It seems unfair that some causes should have to struggle with this more than others”.

Next steps

CTG intends to develop and repeat the Charity Tax Map survey to gather more information and to identify trends in the charitable sector. Over time this will allow CTG to monitor trends in the total level of taxation faced by the sector.