VAT change costs Anchor House dear

SERVICES FOR the homeless will be put at risk by a surprise decision by the Government to charge VAT on a new development, a leading Catholic charity warned this week, writes Joanna Moorhead.

Caritas Anchor House has been told by HM Revenue and Customs that it owes £1 million after creating a development of “move on” flats to support the homeless at its base in the London Borough of Newham. 

In similar new projects in the past, said the charity’s chief executive Keith Fernett, the VAT bill had been waived – so he was shocked to be told that changes Anchor House made to the description of its services, defining itself as a “residential and life skills centre” rather than a “homeless hostel”, meant it was now eligible for VAT. 

“This has implications for every British charity that has a contractual relationship to developing services,” he said.  “We are doing exactly the same work for the same people – all we have changed is that we now use more positive language.”

Caritas Anchor House provides accommodation to more than 230 people a year, working with vulnerable groups including those experiencing domestic abuse and mental health problems. Mr Fernett said a report carried out by economic forecaster Oxford Economics found the charity provides £3.68 in societal benefits for every pound spent in its operations.