The Mobile Data Association’s announcement that VAT will be waived on text donations has been welcomed by charity organisations who have been campaigning to break down barriers to fundraising and donating by text.

In March 2008, the then Treasury Minister, Jane Kennedy, confirmed that text donations should be treated the same as other donations and not be charged VAT.

Since then a campaign group led by Joe Saxton the former chair of the Institute of Fundraising, and Hannah Terrey, head of policy and public affairs at the Charities Aid Foundation (CAF) has been lobbying the mobile phone industry to stop charging donors VAT on text donations.

All mobile phone operators have different charges but typically only approximately 95 pence of a £1.50 donation reaches the charity after VAT and other charges have been deducted.

When VAT is no longer charged around £1.10 of a £1.50 donation will go to charity.

The issue has been that mobile phone operators couldn’t separate out texts sent to charities from other texts.

The campaign group suggested that text donations for charity be given unique numbers so they can be easily identified.

Today’s announcement means that when the new numbers have been set up people will be able to donate up to £10.00 to charity by sending a text message, for example, “charity name” to a dedicated number which will begin with the number seven.

Joe Saxton for the Institute of Fundraising said: “This is a giant step forward. Currently VAT and other charges are putting charities and donors off donating by text. We estimate donations from this type of giving could reach £100 million in 5 years time – if charges come down to around 5-10p per text in total.

“What we need now is for one of the socially aware mobile phone companies like Virgin or Vodafone to take the lead in lowering their charges.”

Hannah Terrey, head of policy and public affairs at CAF, said: “It’s great news that the mobile phone companies have been able to agree a way forward to end this illegal practice which is unfair on donors and charities.

“The most important thing for donors is to know that as much as possible of their donation goes to help the cause they want to support. Now that they have made this leap forward we hope the mobile phone companies will bring down their charges too.”