Budget 2021 a “missed opportunity” for government to support charities

Insurance Premium Tax (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.

Ecclesiastical’s Charity Risk Barometer 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 many charities having used reserves to navigate the pandemic, 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.

Richard Sagar, acting head of policy at Charity Finance Group, said: “Spending on Insurance Premium Tax has substantially increased for charities in recent years, which has meant they have less money to spend on delivering charitable objectives and helping beneficiaries.

“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.

“It’s critical that government supports civil society and engages with us. Only then can we boost those levelling up ambitions, and help put this ugly crisis behind us – all while we continue to serve those who desperately need us."

Faith Kitchen, customer segment director at Ecclesiastical Insurance, said: “The government has missed a unique opportunity with this budget, the first since before the pandemic, to put an end to charities having to pay IPT.

“Our charity insight barometer found that financial pressure was the biggest risk facing charities. By granting charities exemption from this tax the government will free up vital funding, enabling them to continue to carry out their vital work and to plan for the future.

“Charities have constantly stepped up to support those most in need and the last 18 months has tested them to their limits. The loss of funding through fundraising activities and an increase in demand for their services has left many charities at crisis point, using vital reserves to stay afloat."

To support charities struggling with their finances, Ecclesiastical launched its fundraising hub last year which includes useful resources developed alongside Philanthropy Company and Directory of Social Change.