UK Government Backs Down on Taxing Charity SMS Messages

The UK government has clarified that sales taxes should not be charged on SMS messages which are used to raise funds for charity. The clarification came from Jane Kennedy MP, Financial Secretary to the Treasury, who, in a written answer to a question raised by MP Mark Oaten, stated: "Donations to charity, including those made by text message, are outside the scope of VAT-which means that no VAT is payable on them."

Charity SMS provider, Vir2 said that the practice of charging VAT on the whole amount of any donation was previously widespread practice amongst UK mobile networks.

The result is a victory for Roger Craven, Managing Director of Vir2 who initiated the campaign and the Liberal Democrat MP, Mark Oaten, who together have been lobbying hard to achieve a clarification. Jane Kennedy's response was to a letter Mark Oaten wrote in October last year. Mark has also raised an Early Day Motion, co-sponsored by Peter Bottomley MP, calling for the removal of VAT charges on text donations. Vir2 have been writing to and lobbying MPs to support of the Early Day Motion, which now has the signature of 55 MPs.

The subject of VAT on text donations were first raised as an issue in the Asian Tsunami appeal when over £1 million was raised in just 3 days of launching the text campaign. On that occasion HMRC backed down in the face of overwhelming public pressure and gave a one off donation to the appeal in compensation for the VAT charged.

Roger Craven, Managing Director, Vir2 commented "Text donations are now comparable with other ways of collecting donations in terms of the proportion payable to charity. Potential donors are as likely to carry a mobile as a credit card, but unlike credit cards, mobile phones are also a way for charities to communicate their appeals as well as an easy and convenient means of small value payment."

"VAT free" short codes that can only be used by registered charities for the purpose of fundraising are, in Vir2's opinion, the best future solution for the sector. The political head of steam that this campaign has built up has also been good for raising awareness of the potential uses for mobile technology in the third sector."

Posted to the site on 4th March 2008