A PRESTON charity chief claims a loophole in the law is costing them more than £14,000 a year.

Anne Marie Potter, manager at Cuerden Hall, which provides hospice and neurological care, claims the laws on VAT discriminate against charities.

Under current legislation, centres like Cuerden in Shady Lane, Bamber Bridge, are barred from claiming tax back on basic essentials and running costs.

But the anomaly in the system does not extend to similar centres run by local authorities.

It means that while Cuerden paid out £14,272 in VAT last year and cannot claim a penny back, council-run centres would be able to claw back the money.

Mrs Potter said: "Put simply, when we purchase the basic essentials that enable us to provide care such as heat, light, water, IT, telephones, running and maintaining patient transport and building services, we pay 17.5 per cent VAT.

"What is unfair is that, where they provide similar services, local authorities are reimbursed for the VAT that they pay."

Under the 1994 VAT Act, local authorities are reimbursed for the VAT they pay in providing services.

Cuerden Hall, which opened in 1990, is run by parent charity, Sue Ryder Care. It provides adult residential care for up to 36 patients at a time, suffering from conditions including cancer, multiple sclerosis, Parkinson's, and motor neurone disease. It also cares for people with brain injuries and stroke victims, and provides respite and day care services.

It costs £1.4million to run per year, with funds coming from charitable sources, including donations, legacies, and money raised by the many Sue Ryder charity shops.

"Cuerden paid out almost £15,000 in VAT last year," said Mrs Potter. "That equates to an awful lot of specialist equipment that our residents would benefit from."

She is taking her cause to Preston MP Mark Hendrick. "This is such an important issue," she said. "It will be on the top of my list for discussion with Mr Hendrick. I will be asking him to take up the cause for Sue Ryder Care.

"It seems ludicrous that local authorities can claim this back when we provide similar services."

The issue has also been taken up nationally by Sue Ryder Care, and a letter demanding action has already been sent to the Chancellor of the Exchequer, Gordon Brown.

A spokesman for HM Revenue & Customs said that when VAT was introduced in 1973 it was agreed that it would not fall as an added burden on ratepayers, hence, local authorities were able to reclaim tax paid on essentials to meet their statutory obligations.

She added: "This Government has twice conducted major reviews to see if we could find an efficient, affordable, principled solution to the problem of irrecoverable VAT for charities.

"Because of our agreements with our European partners, it would not be possible to introduce a new zero rate or exemption for all or any of the supplies received by charities."

She said that after looking for solutions outside of the VAT system, it was concluded that it would not be an affordable or efficient use of public resources to reimburse the VAT incurred by all 250,000 charitable bodies in the UK as it would cost £400million per year. There was no fair way to decide which should be reimbursed and which should not.

In 2004 Sue Ryder Care, which has 17 centres throughout the country, and provides community-based services and care in people's own homes, paid out £500,000 in irrecoverable VAT nationally.