CTG Newsletter – 2 December 2016
Insurance Premium Tax survey
One of the headline announcements in the Autumn Statement was that the standard rate of Insurance Premium Tax (IPT) will rise to 12% from 1 June 2017 (it is currently 10%). IPT is a tax on insurers and so any impact on premiums depends on insurers’ commercial decisions, although providers usually pass on these costs. Charities do not benefit from an exemption so will be impacted.
We encourage all members affected by this increase to complete this short survey. 55 charities have already responded providing vital information on the scale of the impact on charities. At present the cost of the increase in 2017 for these charities is £192,000, with their total overall cost of IPT now over £1m.
Following the collection of this data, CTG will be considering further representation to Government and the insurance sector about ways to mitigate the adverse impact of these recent changes (and concerns that IPT may increase even further in future, with some commentators predicting an eventual rate of 20% in line with VAT).
VAT and E-books
The European Commission has confirmed that it will enable Member States to apply the same VAT rate to e-publications such as e-books and online newspapers as for their printed equivalents, removing provisions that excluded e-publications from the favourable tax treatment allowed for traditional printed publications.Further information on this and other VAT proposals by the Commission can be found here.
CTG welcomes this helpful development, which we proposed in a response to a Commission consultation earlier this year. Full details of the consultation response are available here. Following the referendum, it remains uncertain what, if any, changes will apply to the UK VAT system. However, regardless of whether the outcome of this consultation will be binding on the UK its outcome will be important, given the cross-border nature of digital publications. The UK also remains subject to all relevant EU law (including VAT law) until the time that the exit from the EU is finalised.
Scottish Income Tax powers – interaction with Gift Aid
The Scotland Act 2016 requires the Scottish Parliament to maintain a Scottish basic rate and all areas of income tax legislation which reference basic rate have already been amended, to include Scottish basic rate, to facilitate the Scottish rate of income tax. The remaining areas of income tax for which further Scottish income tax powers have implications are mainly therefore those which reference rates of tax other than the basic rate. In such cases consequential amendment is required to ensure the continuing unchanged operation of such areas (for example Gift Aid and relief at source pensions) should the Scottish Parliament choose to move away from the basic, higher, additional rate band structure that currently applies in the UK.
Regulations giving effect to these consequential amendments will be made prior to the start of the 2017/18 tax year. Proposed Regulation 10 amends section 414 of the Income Tax 2007 (c. 3) which deals with relief for gifts to charity. In the case of a Scottish taxpayer who has made a qualifying donation, the Scottish rate limits will be increased by the grossed up amount of the gift in addition to the basic and additional rate limits applicable elsewhere in the UK. Further information can be found here.
Tax status of charitable independent schools
A current DfEconsultation on the future of schools proposes that independent schools with the capacity and capability should meet one of two expectations in recognition of the benefits of their charitable status (a) To sponsor academies or set up a new free school in the state sector (b) to offer a certain proportion of places as fully funded bursaries to those who are insufficiently wealthy to pay fees. Respondents to the consultation are asked whether the Government should consider legislation to allow the Charity Commission to revise its guidance, and to remove the benefits associated with charitable status from those independent schools which do not comply.
The document is not explicit about what it is threatened, but the implication is that there would be a denial of tax reliefs (especially non-domestic rates relief) for charitable independent schools in England. CTG is always concerned at attempts to limit reliefs to “deserving charities” as this sets a dangerous precedent that could threaten to undermine the principle of charitable tax relief. Further information on the consultation (which clsoes on 12 December 2016) can be found here.
Tampon Tax Fund
The Minister for Civil Society has launched the opening of the 2017/18 round of the Tampon Tax Fund. DCMS is welcoming proposals from organisations that work to improve the lives of disadvantaged women and girls more generally.
Consultations tracker
CTG will be considering responding to a number of important consultations over the next few months. Our consultation responses rely on input from members and we would encourage you to send us your thoughts, and where relevant submit your own consultation response. The deadlines for forthcoming consultations are outlined below. Please send your feedback via the relevant consultation page on the CTG website or to info@charitytaxgroup.org.uk.
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