Budget 2017 special edition focusing on business issues that affect the charity sector

Transcription

1 Charity Review Budget 2017 special edition focusing on business issues that affect the charity sector Spring 2017 The general reaction from charity commentators is that there was little in the Budget affecting the sector apart from the additional funding for social care. Much has been made of the fact that stability can be a virtue, however, there are some developments which will still have an impact on charitable organisations. Making Tax Digital ( MTD ) The government will provide an extra year, until April 2019, before MTD is mandated for unincorporated businesses and landlords with turnover below the VAT threshold. This will provide them with more time to prepare for digital record keeping and quarterly updates. Employee remuneration Employers can choose how to pay and incentivise their employees but the tax treatment of these can vary. The government is now looking at the taxation of benefits in kind and employee expenses. This includes consulting on the tax treatment of employer-provided accommodation. It will include proposals for when accomodation should be exempt from tax and how to support taxpayers during any transition. This will have an impact on those charity employees who may be in receipt of employer related accomodation. Income tax and National Insurance The increase in the personal allowance by 500 to 11,500 coupled with an increase of 2,000 to the higher rate threshold, will cut income tax for some of the lowest paid workers in the country, many of whom work in the voluntary sector.

2 Research and development ( R&D ) tax review The government s green paper on Industrial Strategy reinforced their ambition to drive up the level of private investment in science, research and innovation. The review of the R&D tax regime has concluded that the credits regime is an effective support for innovation. We can only wait and see whether the scheme can be extended to non-university charities. Business rates The overhaul of business rates has led to some discrepancies in the relief available, with many charitable trading subsidiaries potentially being worse off. The government has announced that it will provide a further 435m of support for businesses facing significant increases and it is welcome that this has been extended to trading subsidiaries of charities. Devolution The government has agreed further devolution to London, as a result of which, the government and its London partners will agree a second Memorandum of Understanding on Health and Social Care. Insurance Premium Tax ( IPT ) The government will introduce anti-forestalling provisions and increase the standard rate of IPT to 12% from 1 June 2017; a substantial cost increase for charities where insurance can be a significant business expense. Tampon Tax Fund for women s charities A range of women s charities across the UK, including those that tackle violence against women and girls, will collectively benefit from 12m as part of the round of the Tampon Tax Fund. Value Added Tax ( VAT ): Registration and deregistration thresholds From 1 April 2017 the VAT registration threshold will increase from 83,000 to 85,000 and the deregistration threshold from 81,000 to 83,000. Stamp Duty Land Tax As a result of consultation, the government will delay the reduction in the filing and payment window until 2018/19. The maximum credit allowable is the equivalent of qualifying expenditure of 500,000. Following consultation on the draft legislation, the legislation will be revised to allow for exhibitions which have include a live performances as part of the exhibition (but where a live performance is not the main focus of the exhibition). The measure will take effect from 1 April 2017.

3 Corporation tax relief for museums and galleries As announced in 2016, the government is introducing a new tax relief for museums and galleries which develop new exhibitions, including those that are toured. The rates for the relief will be 25% for touring exhibitions and 20% for non-touring exhibitions. The relief will allow museums and galleries to claim a credit worth up to 100,000 on exhibitions that are toured and 80,000 on non-touring exhibitions. The maximum credit allowable is the equivalent of qualifying expenditure of 500,000. Following consultation on the draft legislation, the legislation will be revised to allow for exhibitions which include a live performance as part of the exhibition (but where a live performance is not the main focus of it). The measure will take effect from 1 April Changes to the Gift Aid Small Donations Scheme ( GASDS ) to take effect from 6 April 2017 The Gift Aid Small Donations Scheme allows charities and Community Amateur Sports Clubs ( CASC ) to claim gift aid on small cash donations of up to 20 (where a charity conducts a street or religious service collection), without needing to obtain a Gift Aid declaration or establish a link to the donor s tax record. Eligibility requirements The current requirement is that the organisation has been recognised as a charity or registered as a CASC for at least two tax years, and has made at least one successful Gift Aid claim in two of the previous four years, without a gap of at least two years. This has now been removed. This will make it easier for newly formed and existing smaller charities or those with less capacity to assess their eligibility under claim. However, an organisation will still be disqualified from making a GASDS claim where it has incurred a penalty in respect of a GASDS or Gift Aid claim in the tax year in which the offending claim was made and the following tax year. The claim limit under the GASDS also remains; meaning that in any tax year a charity can only claim a top-up payment on small donations totalling ten times the amount of its Gift Aid donations for that tax year. So if a charity claims Gift Aid on 100 worth of donations it can claim a GASDS top-up payment on small donations (worth up to 1,000), subject to a maximum specified amount (currently 8,000). This means that the maximum top-up payment that can be received for a tax year is, at present, 2,000 (i.e. 25% of 8,000), subject to the community building rules (see below). Where charities and CASCs are connected i.e. where the same persons or connected persons have control over them and their purposes and activities are the same or substantially similar, they share the GASDS limit between them.

4 Contactless payments From 6 April 2017, donations made by contactless payment will also qualify under GASDS, including payments made via contactless card and Apple/Android Pay or similar. Due to the development in card payment technology it is now common for people not to carry cash, which presents a problem for those charities trying to attract street donations. Several charities have responded to this through the use of tap-to-pay devices and this change is a welcome response to the introduction of new technology. Payments made by cheque, debit/credit card, text message or bank transfer remain excluded. Community buildings Previously, it was possible for a charity or a group of connected charities (but not a CASC) to increase the amount of its donations where it operated charitable activities in a community building. In addition to the usual GASDS top-up payment on up to 8,000, it could also claim a GASDS top-up payment on up to 8,000 of small donations received in each community building in which it operated (the community building amount). So a charity which undertook its activities in numerous community buildings could substantially increase its GASDS claim. From 6 April 2017 a charity, or group of charities, can claim either the 8,000 Standard Amount or the community buildings amount, but not both. So a charity or a group of charities will only be able to claim in respect of small donations over 8,000 where there is more than one community building. It will, however, no longer be necessary for donations to be received inside a community building for it to come within the community building amount; rather donations made in the local authority area in which the building is located can qualify. In summary The new rules are designed to simplify the GASDS and make it accessible to more charities. The extent to which they do this is up for debate, but the government has estimated that the changes will result in an additional 15 million per year being paid out to charities under the scheme. The scheme can result in a top-up payment of 2,000 per year so it is worth investigating if your charity can make a claim. What was not included The Budget this year included no mention of Libor banking fines being given to charities for the first time since This method of gifting money to charities has come under fire in the last couple of years over the apparent lack of an application process, leading to concerns about how exactly the money was handed out. In the last year, the Treasury seems to have tightened up its processes, and they announced the opening of an application process for Libor funding ahead of November s Autumn Statement. They also committed a further 102m of banking fines over the next four years to support Armed Forces and Emergency Services charities and other related good causes. In summary It appears that a number of issues were put on hold until later in the year when the Brexit negotiations are clearer but this budget still affects charities and their employees.

5 Our team Mark Hart Business group partner +44 (0) Alan Pearce VAT partner +44 (0) Ella Waddingham Business group manager +44 (0) March Blick Rothenberg Limited. All rights reserved. While we have taken every care to ensure that the information in this publication is correct, it has been prepared for general information purposes only for clients and contacts of Blick Rothenberg and is not intended to amount to advice on which you should rely. Blick Rothenberg Audit LLP is authorised and regulated by the Financial Conduct Authority to carry on investment business and consumer credit related activity. 16 Great Queen Street Covent Garden London WC2B 5AH +44 (0)