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Liam Byrne, shadow chief secretary to the Treasury, says increase will make it difficult for charities to compete with the public sector

MPs will today debate an amendment to protect charities from the extra cost of the 20 per cent VAT rate announced in last month’s Budget.

Liam Byrne, the shadow chief secretary to the Treasury, said his amendment to the Finance Bill would mean charities would not have to pay up to £70m in extra VAT on non-business expenditure. But they would still have to pay an extra £70m in VAT on exempt services.

Byrne said he felt the government should protect charities from the increase as part of its plan for the big society. The VAT rise would hit small charities disproportionately, he added, and would create a disparity between local government and charities when competing for the same contracts. 

"This is from a government that wants to encourage charities to step up to provide public services in an age of austerity as part of a big society," he said.

"Unlike charities, local authorities are able to claim back VAT. This increase in the standard rate will make it even more difficult for charities to compete with the public sector."

Source: Third Sector