Renewed calls for charities to be exempt from Insurance Premium Tax (IPT) ahead of budget

24 February 2021

Following the most challenging 12 months in the charity sector’s history, Ecclesiastical and the Charity Finance Group are calling on the Chancellor to make charities exempt from paying IPT.

Lots of £2 coins in a jar

IPT is a tax on general insurance premiums, such as home, car and travel insurance, however the vast majority of charities, especially those who own property and have significant operational costs, are also impacted.

Ecclesiastical insures more than 45,000 charities and not-for-profit organisations in the UK and for a number of years the specialist insurer has lobbied the government with the Charity Finance Group (CFG) to call for charities to be exempt from paying IPT.

With insurance an unavoidable cost for charities, either because they are legally required to, or because they are acting responsibly by putting adequate protection in place for their activities and assets, the additional cost of IPT puts a strain on already stretched budgets.

Last year Ecclesiastical carried out research involving a survey of 250 charities and roundtable discussions to establish the greatest challenges facing charities in light of COVID-19 and ongoing political instability.

The findings found that the sector is creaking under the combined weight of increased demand and reduced funding, with two thirds (72%) concerned about funding as a result of the pandemic and a third (32%) worried about existing beyond the crisis.

With government support packages not expected to continue indefinitely, the fate of the charity sector looks bleak with potentially the worst still yet to come for charities already making redundancies as a result of financial pressure.

Angus Roy, charity director at Ecclesiastical, said: “We are again urging the Government to very carefully the negative impact that IPT is having on the work that charities do and grant them an exemption from this tax.

“Charities have become used to dealing with challenges, but this year has given us a perfect storm of a loss of funding through fundraising activities and an increase in need - which has left many charities at crisis point.

“The charity sector has constantly stepped up to support those most in need and has worked tirelessly in our communities throughout the pandemic. The money saved by not paying IPT would free up vital funding and help contribute to increasing their impact.

“At the same time we urge the government to do more to support the charity sector – and that is why Ecclesiastical is lending its backing to the budget submission the CFG has made, in conjunction with the Charity Tax Group, to the government calling for more support for the sector.”

Richard Sagar, policy manager at Charity Finance Group, said: “Against a backdrop of increasing demand and reduced capacity to deliver services, the elongated nature of this crisis means that any additional tax burden on charities will mean their ability to help those most in need will be in jeopardy.

“With renewed pressure on the Chancellor to increase so-called ‘stealth taxes’ to help raise revenue, Charity Finance Group is calling for charities to be exempt from Insurance Premium Tax, and at a minimum for no further increases.

“We are also calling on the Chancellor to deliver a renewed package of dedicated support measures for charity and social change organisations, so that we can meet the immediate challenges presented by COVID-19, Build Back Better and level-up our communities.”