Charity directors have submitted a series of requests to the Treasury, seeking budget amendments that could help the third sector make significant tax savings.

The Association of Chief Executives of Voluntary Organisations (acevo) and the Charity Finance Directors’ Group (CFDG) delivered the document to the Treasury demanding 15 changes on issues from payroll giving, through gift aid, to VAT structure.

Irrecoverable VAT costs the third sector approximately £500 million each year and forms part of what voluntary chiefs have described as an overly bureaucratic system for charitable organisations.

“Charities’ annual VAT bill of £500m should no longer be diverted from charitable activity to the Exchequer,” said Nick Aldridge, director of strategy at acevo. “The present system is extremely complex and fundamentally unfair. It is in need of urgent reform.”

CFDG policy and campaigns officer Ernese Skinner added: “Money is being leeched from charities to consultants and advisers to ensure proper compliance with legislation which is inconsistent, difficult for charities to get right and resource intensive.

“We want to see charities able to undertake all of their trading within the charity without need for a separate trading subsidiary.”

Small charities trading redemption should be lifted from £50,000 to £250,000, according to the CFDG.

Both groups would also like to see all donations submitted to charities gift aided.