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VAT waived on two Christmas charity singles – a sign of things to come?

Towards the end of November, Chancellor George Osborne showed a surprisingly charitable side to the Treasury by waiving all VAT on a charity single.

The single in question was “Wishing on a Star”, an ensemble piece recorded by all 16 finalists of TV talent show The X Factor and previous contestants JLS and One Direction. Prior to the record’s release in music stores and online, it was announced that all profits would go to the charity Together for Short Lives, which provides care and support for children suffering from terminal illnesses.

While there was nothing unusual about a group of pop stars recording a charity single, especially in the run-up to Christmas, the taxman’s subsequent generosity was perhaps viewed as more unlikely by many.

“I know that Together for Short Lives does great work supporting life-limited children and their families,” said Chancellor George Osborne in a statement. “To help these children, I will give back to the charity the money the tax man collects on the X Factor charity single so that more of the money the generous British public spend on the single will go directly to charity.”

It’s important to note that although VAT has been “waived”, it was in fact collected as normal, but the government pledged to make an equivalent donation to the charity. The waiver was also time-limited, as spelled out on the HM Treasury website: “The donation will be equivalent to the sum of the VAT receipts collected on sales before the end of December 2011.”

So, in this instance, the record company, its accounting books and the consumer will be unaffected by the decision, but the charity stands to benefit greatly by the extra donation made by the Treasury itself to equal the VAT taken.

The taxman shows Christmas goodwill once more

Although it may seem rare that the government declines an opportunity to further fill its coffers with the VAT collected from the sale of popular items, it happened again during the run-up to Christmas.

After increasing pressure following the decision to waive VAT on the X Factor single, the Treasury also agreed to forgo the VAT on the charity single that would go on to be Christmas Number One – ”Wherever You Are” by the Military Wives Choir.

The single, whose proceeds went to The Royal British Legion and the Soldiers, Sailors, Airmen and Families Association (SSAFA) Forces Help, was initially not granted the same relief as the X Factor single, but after intervention by George Osborne it was announced that the VAT collected would once again be donated to the charitable beneficiaries of the single.

Osborne said: “We will donate the tax collected on the single so that as much as possible of the money spent by the public on this fantastic song goes to charities helping our armed forces and their families this Christmas.”

Setting a precedent?

While these charitable actions may lead to further pressure on the Treasury in future to do the same for other good causes, it is telling that these are one-off gestures, in the form of donations announced by the Chancellor himself, rather than anything enshrined in tax law.

A precedent may well have been set for charity Christmas singles and causes that are heavily publicised in the media, but it seems unlikely that these charitable donations by the Treasury will become anything more widespread.



Terry Irwin, CEO and Head of UK Office, TCii Strategic and Management Consultants.

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