June 27, 2016

Tribunal decision in charity tax case could have ‘big implications’ for the sector, says CEO

Friends of the Earth was ordered to pay a “shocking” tax bill of over £1million last week, after a Tribunal sided with HM Revenue & Customs (HMRC) and ruled that numerous payments made by its supporters were outside the scope of VAT.

The Tribunal ruled that such payments were to be considered donations, and not consideration for a supply of the charity’s magazine, Earthmatters.

Friends of the Earth chief executive, Mr Craig Bennet, labelled the decision “shocking” and “disappointing”.

He said that the ruling could set a dangerous precedent for other charities, claiming that the decision had “big implications for the charity sector as a whole”.

Mr Bennet said that Friends of the Earth had been following advice provided to it by HMRC up until the point it was contacted by the tax man to say that it owed approximately £1m.

“We have letters from HMRC stretching back to 1999 telling us that the way we were doing this is correct. All Friend of the Earth’s interest has even been is to follow the guidance that we’ve received in the past from HMRC and our own tax advisers,” he said.

The charity appealed against HMRC’s decision to no avail.

“It is very surprising and disappointing that the Government’s priority at the moment is to try and grab extra tax from charities, meaning less money going to good causes, when they seem to be doing so little to get tax from large corporations and from tax havens,” said Mr Bennet.

“Their priorities are in completely the wrong direction, and that is very surprising and disappointing,” he added.

Defending the Tribunal’s decision, an HMRC spokesperson said: "The Tribunal’s decision in this case supported our view that monthly donations by supporters to Friends of the Earth were not payment for its magazine."

Royds has a wealth of experience advising charity clients on the laws and regulations affecting the sector. For further advice on these matters contact Tony Millson or Deanna Hurst.

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