Catholic homeless charity Caritas Anchor House has warned that hundreds of the people it helps are at risk after they were presented with a £1million VAT bill.
The charity, based in Newham, east London, was told by HM Revenue and Customs it faces the bill for developing “move on” flats to support homeless people.
The charity provides homes for 230 people a year, and works with those who have experienced domestic abuse, suffer mental health problems, substance abusers and offenders.
The huge tax bill came about because the authorities deemed that the charity’s definition of the its services as a “residential and life skills centre” rather than a “homeless hostel” left it subject to VAT, even though the charity had not changed its activities.
The charity says it is being penalised for accurately describing its work, and appealed to the Government to reverse the decision.
The charity’s CEO House Keith Furnett told local paper The Wharf: “HMRC’s application of VAT in this case is devastating to our work and to the vulnerable people we support.
“We believe we’re being unreasonably penalised for accurately describing our operations despite not changing what we do.
“What makes this situation even worse is that we have worked incredibly hard to deliver a level of service with a reliance on donations and relatively little government funding.
“We hope HMRC will reverse its decision, and allow us to continue making a huge difference to people’s lives. Otherwise our work is at risk, and local authority services will be put under greater pressure.”