UK charities may have to pay tens of millions of pounds in VAT following a change in the ruling on direct mail shots.
HMRC stated that printing and mailing companies were offering additional services which should not be eligible for VAT relief.
The VAT relief for charities has been estimated at upwards of £300 million, and charities already face a VAT bill of £1.5 billion.
A knock-on effect could see charities deciding to decrease their promotional and fundraising efforts in an attempt to reduce costs – but this in turn could see their donations drop.
Charities are considering whether to take a legal challenge against the ruling, but HMRC said it is confident that the guidance over the ruling is legally correct.