The newly formed coalition government of Conservatives and Liberal Democrats provides an opportunity for the Charity and Not for Profit Sector to revisit the policies set out in the individual parties’ manifestos. The huge financial burden which the coalition government urgently needs to address will inevitably have negative consequences for the third sector. Now is the time for trustees and chief executives to undertake a detailed review of the operation of Charities and Not for Profit entities.

In recent times, charities have suffered a reduction in donations, legacy and investment income and there is now a very real threat that state and local government assistance will also be reduced. Added to this, is the increasing cost of regulatory burden, the threat of inflation and increased competition for both time and resources.

However, all is not doom and gloom as David Cameron and Nick Clegg have recently unveiled the coalition government’s plans for implementing a Big Society Programme, including setting up a Big Society Bank and introducing a National Citizen Service. Whilst the motives for such an agenda are well meaning, all too often government initiatives of this kind are found to be wanting, and ultimately fail to achieve their objectives. Furthermore, it is unclear from the initial plans quite how this will benefit the Charity Sector.

So what should chief executives and trustees be considering? Firstly, it will be necessary for each entity to identify the help needed. In what appears to be a more enlightened government, there is scope to lobby for change. Reviews of Gift Aid policy and the way VAT is applied to charities are promised. There is an opportunity to shape future policy, and lobbying both MPs and local councillors can be an effective way of influencing possible reforms.

Undoubtedly successive governments and chancellors have failed to understand the impact that the complicated and time-consuming tax system has had on charities. Both the Conservatives and Liberal Democrats have promised a review and there appears to be recognition of the huge cost incurred in complying with the current rules. Hopefully, there will be a simplification in the process of claiming Gift Aid and the recovery of VAT incurred by charities. If you do require advice in relation to the impact of tax on Charities and Not for Profit entities, then we shall be pleased to hear from you on charities@menzies.co.uk.

Looking forward, whilst there is no doubt that difficult times lie ahead, hopefully the future will be brighter as the country emerges from recession and the benefits of changes in government policy affecting charities are felt.

This article is taken from the Autumn 2010 issue of Menzies' Charities Insight publication.