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NEWS > Charity Sector News > Budget 2022 Submission

Budget 2022 Submission

Charities Institute Ireland (Cii) has finalised its pre-budget submission to be considered in the drafting of Budget 2022 and the Finance Bill 2021. The submission recommends a number of measures...

Budget 2022 Submission


In May 2021, Benefacts produced a special report on Irish charities, informed by the impact of the Covid 19 pandemic on Irish society. The report identified a number of emergent trends:

  • Charities in sectors such as emergency relief, homelessness, mental health, local development and social services experienced an increased demand for their services.
  • In some sectors (the arts, culture), charities without the capacity to move to digital ways of working have been unable to operate at all, or only to a very limited degree. They report staff cutbacks and other cost saving measures but have limited reserves and cannot avoid all fixed costs.
  • •Most sub-sectors have reported some positive effects, including heightened public awareness of the value of their work, better engagement across geographic divides, cost and time savings for example in travel, adopting more diversified fundraising solutions especially digital ones.
  • With full lockdowns only expected to be lifted at the end of Q2 in 2021, a tougher year ahead is being predicted. Surveys of charities by their lead bodies and by Benefacts indicate that most of these charities anticipated losses in earnings between 15% and 65% and fewer charities entered 2020 with substantial financial reserves.

It is against this backdrop that Charities Institute Ireland (Cii) recommends the following measures be considered in the context of Budget 2022.

  1. VAT Compensation Scheme - renew the scheme and increase the fund available to €20m to meet demand;
  2. Sustainable Funding - Accelerate multi funding arrangements;
  3. Reducing the Burden of Compliance - Expediate development of centralised database;
  4. Ensure Sustainable Funding for HSE Section 39 - Parity of employment conditions for Section 39 employees to support staff retention;
  5.  Digitalisation grants - Support scheme for upskilling charity staff to enable digital transformation;
  6. Benefacts - Continued funding of Benefacts to support independent research for the sector

VAT Compensation Scheme

The VAT Compensation Scheme for charities was introduced in Budget 2018 to reduce the tax burden on charities and to partially compensate them for the VAT paid in delivering on their charitable purposes. Under the scheme charities may claim a refund of a proportion of their VAT costs based on their level of non-public funding

Cii would like to acknowledge and thank the Minister and the Department of Finance for their support in creating the Scheme. A review of the Scheme is currently being finalised by the Department of Finance and the Revenue Commissioners and will be published by the Tax Strategy Group in due course. Cii was pleased to engage with both organisations and contribute to the review.

The scheme has now operated for two years with payments having issued in 2019 and 2020. In those two years, claims received exceeded the capped amount available. In 2018, 1,100 claims, valued at approximately €40m were made while 900 claims valued at €49m were submitted in 2019. These payments were calculated and issued on a pro-rata basis, as a result charity received 13% and 10% of the original claim submitted.

These numbers confirm the that the demand for the scheme justifies the continuation of the scheme.

In April 2021 we conducted a survey for the review to ascertain the value of the VAT Compensation Scheme to the sector and to assess how the scheme worked operationally. Almost 90% of respondents reported that the VAT Compensation Scheme claim process was straightforward and easy to follow and that for the charities that did need to engage with Revenue, that experience was overwhelmingly positive.

The survey also highlighted the value and importance of the scheme in empowering charities to deliver their mission. Some examples of direct feedback from the survey and consultation with charities include:

  • “The VAT compensation scheme has enabled us to dedicate even more funds to our vital cancer services. This was particularly true given the challenges and increases in demand for our services due to Covid-19. The €68k we received from the VAT compensation scheme in 2020 is the equivalent of funding nearly 200 nights of palliative care for cancer patients through our Night Nursing programme.”
  • “ISPCC – the refund from the Scheme is equivalent to running Childline for two days.”
  • “Grant funding covers about 50% of our annual running costs and we depend on fundraising income to cover the remainder. Any income, including the VAT compensation scheme, enables us to provide the range of housing and support services we offer.”

The main finding from the survey was the huge value of any additional income in supporting charities to deliver their missions.

For this reason and based on the operational success of the Scheme, Cii recommends that the funding of the Scheme increase from €5m to €20m. We believe that such an increase is aligned with the original paper produced by the Working Group on VAT;

“The charities’ view is that the VAT burden significantly diminishes the capacity of charities…. to deliver services; that it promotes over-reliance by charities on state grants and the taxpayer; and is at odds with Government efforts to regulate the sector in that it penalises good governance in organisations that use professional financial, legal and training services.”

In the event of the fund increasing, we believe that a claim ceiling of €1m should apply. It is important to remember that the scheme was developed to support charities that have less dependence on the state as they rely primarily on fundraised income which lessens the dependence on the state for financial support. There is a risk that smaller charities might be displaced by larger charities and may not submit claims due to the level of work involved in order to receive a small payment.

We believe that while the best means of ensuring a higher proportion of compensation is to increase the overall pot of money available, a maximum claim amount does need to be introduced to ensure no single claim disproportionately draws on the Scheme in favour of any one charity. This would allow continued substantial payment to charities while protecting the total funding available for the maximum benefit of all charities.

Request – renew the scheme and increase the fund available to €20m to meet demand

Sustainable Funding

In order to plan adequately, charities need clarity on future government funding. We are calling on Government to accelerate the implementation of the Department of Rural and Community Development’s Five-Year Strategy for the Sector - Sustainable, Inclusive and Empowered Communities

The implementation of the DRCD strategy is ambitious given the scale of the challenge. While the Department has established the Independent Review Group (IRG) to progress this strategy and Cii is very supportive of the initiative, there is a concern among Cii’s members that progress remains slow.

We are calling on the Government to introduce multi-annual funding arrangements to enable long term planning for both service provision and staff recruitment and retention.

Where government is funding the work of charities through a grant or service-agreement, funding should be allocated on a multi-annual basis so that charities can plan their work efficiently. Strategic planning is almost impossible when funding is renewed annually and all too often funding is confirmed when budgets and plans have been put place which results in additional administrative burden on valuable resources.

Request – Accelerate multi funding arrangements

Reducing the Burden of Compliance

Many charities are subject to regulation or oversight by a number of state agencies - The Charities Regulator, the Revenue Commissioners and State funders such as the HSE.

Although charities recognise the importance and benefits of increased compliance, and feel better protected by its introduction, the overhead this requires is significant for many charities and growing year on year.

There is currently no additional funding provided to match the work required to meet the significant number of standards.

Many charities have faced over a decade of cuts to their core statutory funding and during this time the number of standards and codes to comply with grew. These charities are fully committed to best practice, however, the overhead of complying with, and evidencing, compliance with all of these standards and codes is causing huge strain on resources particularly given the increased demand for support and services.

While no comprehensive research has been produced on the impact of COVID-19 on people working in the sector – a recent survey conducted in the UK, indicated that nine in 10 charity workers have felt stress, overwhelm or burnout over the past year. The survey shows that while the pandemic was the primary cause of this stress, others leading factors included funding concerns and job insecurity, Cii welcomed the commitment to exploring “the establishment of a centralised database for information about those in receipt of State funding for the delivery of community services” in DRCD’s latest strategy statement. This initiative builds on the recommendations from Indecon’s report in late 2019 into the potential for a ‘Charity Passport’ for charities in Ireland, Cii would like to see the implementation a number of recommendations from the study. This system, when developed, could provide a streamlined compliance and regulation system which would allow charities to enter their data once which could then be accessed by multiple departments, funders and the public as required. This would reduce the administrative costs to government departments in repeat processing of information and reports.

Professionalism comes at a cost and the Government should fund charities adequately to enable them to secure the entire cost of delivering vital supports and services, such costs include administration, compliance and salary overheads.

Request – Expediate development of centralised database to reduce burden of compliance on charities

Ensure sustainable funding for HSE Section 39

Section 39 organisations deliver vital services across health, family support, social care and disability services. Unsustainable pay and conditions for the staff of such organisations is a major issue that threatens the ability of many organisations to retain staff and provide services. It is resulting in the continued loss of experienced staff from these agencies and organisations with people leaving to pursue more secure, stable, therefore, more attractive career opportunities.

Due to the nature of much of the work the sector delivers, it is critically important to have a motivated and supported workforce to deliver much needed services.

Sustainable pay and terms and conditions for staff would greatly assist in retaining these fully qualified staff.

We need a commitment from government to address these issues by creating a more equitable and fair system for section 39 employees. This is needed if the sector is to continue to support and as often is the case, replace the role of government in the provision of essential services to Irish society.

Request – Parity of employment conditions for Section 39 employees to support staff retention

Digitalisation grants

The Government has announced a range of initiatives for the private sector focused on increased digitalisation of services and related training. However, no such schemes exist for the charity sector.

With so many organisations within the sector undertaking their work and providing their services online there is an increased need for digital innovation supports. For many organisations they have had to invest in technology and upskilling of staff to allow them to continue their work which has placed a further additional burden on their organisation.

We are asking the Government to introduce a support scheme for charities to support the digitalisation of services and the necessary training for staff. Such a scheme could be based on the COVID-19 Online Retail Scheme administered by Enterprise Ireland.

Request – Support scheme for upskilling charity staff to enable digital transformation


Cii, together with our members, values the work of Benefacts in delivering independent research on the non-profit sector. We particularly welcomed the recent report, referenced in our introduction, which was dedicated to the charity sector and the immediate impact of the COVID-19 crisis on the sector.

Professional, independent and insightful research is an essential tool in supporting a vibrant charity sector while ensuring that stakeholders, like Policymakers, regulators and donors have access to data to support their decision making. We would encourage the Government to continue to fund this valuable resource.

Request – Continued funding of Benefacts to support independent research for the sector

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