Chancellor urged to exempt charities from insurance premium tax

The Charity Finance Group body and insurance firm Ecclesiastical have joined together to urge the Government to exempt the third sector from insurance premium tax. The IPT is a tax on general insurance premiums.

The rate of tax that charities have to pay has doubled in the last 2 years to 12% and there are also concerns that the government will increase it even further and that it will become equal to the VAT rate, which is currently 20%.

According to research from the CFG, if this increase would be the case, it could result in the charity sector paying a total of £83 million a year.

Regardless of this, the government has insisted in the past that it would be difficult to implement an exemption to charities from IPT, but the GFC disagree with this statement.

The appeal for the exemption of charities from the IPT comes after a campaign by the Association of British Insurers to freeze IPT at its current rate due to the increasing insurance premiums to the public.

The executive of policy and engagement of the CFG, Andrew O’Brien, stated: "At a time when charities face increasing and more complex demands on services, strain on finances and economic uncertainty, the government should not increase charities’ overheads.

"If the Chancellor decides to raise IPT even higher, the result will simply be less money for charities to spend on their charitable activities. We urge the Chancellor to reduce the costs of IPT for charities in the short term, with a view to exempting charities in the longer term."

The Charity Director at Ecclesiastical, David Britton, stated that the increases in IPT have resulted in charities, on average, paying an additional £300 on top of their insurance premiums, in comparison to a £150 that they were paying 2 years ago.

"The government has long recognised that charities should be treated differently from commercial businesses by granting reductions and exemptions from other taxes, including VAT, business rate relief and Gift Aid, so it seems strange that IPT is currently an exception to that rule," he said.

"Alongside the CFG, we are urging the government to consider very carefully the negative impact the increases in IPT are having on the work that charities do and consider granting them an exemption from this tax."

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Source: Third Sector;