The government should introduce a new special charity VAT rate on purchases, after research found that charities are losing almost £2bn in VAT a year.
The Value of VAT Reliefs for the Charity Sector, which was commissioned by the Charity Tax Group (CTG) and conducted by London Economics, found that the current VAT reliefs on purchases of goods and services reduce the tax burden for charities by £800m a year.
After this is taken into account, the VAT levied on charities purchasing services (known as input VAT) stands at around £3.1 billion per year.
However, over half of this, £1.8 billion or 57%, is believed to be irrecoverable, according to the report.
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