After last year’s positive Budget for charities, we are very concerned about some of the announcements in this year’s Budget, which could have a very significant, adverse impact on parts of the sector.

Overall, the Budget seems to contain more bad news for charities than good. This is of concern to the sector as we look to Government for active support for its work which includes: protecting the most vulnerable in society, conserving the built heritage, protecting the environment and undertaking pioneering medical research – to name but a few areas. Many of the positive announcements in the Budget simply confirm previous commitments on which CTG has been closely liaising with HMRC. We welcome this consultative process with the tax experts within the sector, which can lead to practical and balanced legislation. Where there is less engagement with the sector the position of charities is sometimes forgotten, with potentially serious financial implications.

The Treasury’s Budget website can be accessed here while all the Budget documents are available here. Further information is available on HMRC’s Budget website here.

Measures that will benefit charities include:

• Confirmation that the Gift Aid Small Donations Scheme will be introduced with an increase on eligible donations to £20 – CTG has been working closely with HMRC to ensure that this new scheme is workable and looks forward to commenting on draft legislation in due course
• Reduction of administrative burdens on charity shops that claim Gift Aid on donations – CTG welcomes the Government’s commitment to work with the sector to simplify the administration of the Gift Aid system and hopes that through the Charity Tax Forum wider simplification of the system will be achieved through the advent of a Gift Aid Database.
• Confirmation that the cost-sharing exemption will finally be introduced in Finance Bill 2012 – CTG welcomes this confirmation after campaigning on this issue for over seven years. However, we still have concerns about its implementation and scope and look forward to commenting on draft guidance in the coming weeks.  If it turns out that the new arrangements do prevent wider take-up of the exemption, CTG will ask the government to review their position.
• Confirmation of the temporary arrangements on the VAT treatment of freight transport services performed wholly outside the EU – CTG is pleased that HMRC is formalising these arrangement that we helped to secure in early 2010, to prevent an adverse VAT impact on aid charities providing emergency relief.
• Confirmation of the new IHT rate for deaths on or after 6 April 2012 where 10 per cent or more of a deceased person’s net estate is left to charity.
• Announcement that the Treasury will conduct an internal review looking into the financial barriers to social enterprise.

 However, having examined the finer detail of the Budget, we are very concerned at:

• The withdrawal of zero rate on alterations to listed buildings – CTG is concerned about this development and expresses regret that despite consultation with the sector charities have been removed from the reduced rate without notifying key stakeholders. This estimated cost to charities and businesses is £85m a year and is likely to affect 1,000 buildings. We anticipate the cost to charities will be at least £50m. There are transitional measures for those locked into contracts entered into before 21 March 2012 and the measure takes effect from 1 October 2012.
• The capping of tax reliefs at 25% of income for anyone seeking to claim more than £50,000 of reliefs – while the Government suggests that it will explore with philanthropists ways to ensure that this measure will not impact significantly on charities that depend on large donations CTG is concerned that these changes will prove to be a disincentive for charitable giving. If sufficient efforts are not made to support philanthropists this policy will clearly be at odds with the government’s attempts elsewhere in the Budget and more generally to promote the philanthropy agenda and giving to charities. In the months that followed CTG joined forces with ACEVO, CAF, CFG, IoF and NCVO to send a letter to the Chancellor outlining the sector’s concerns about the proposed capping of tax reliefs. The Giveitbackgeorge campaign was successful in persuading the Government to reverse this policy proposal.
• The withdrawal of charitable buildings from the scope of the VAT reduced rate for the supply and installation of energy-saving materials – while not wholly unexpected (due to a lack of vires), CTG is concerned at the loss of the reduced rate for charities.

Charities should also be aware of the following announcements

• Gifts of pre-eminent objects – As announced at Budget 2011, from April 2012 where taxpayers donate a pre-eminent object or collection of objects to the nation and that object is accepted, the taxpayer will receive a reduction in their tax liability based on a set percentage of the value of the object they are donating. For individuals the tax reduction will be 30 per cent and for companies 20 per cent. (Finance Bill 2012).
• Community Amateur Sports Clubs (CASCs) – The Government will legislate to amend CASC legislation to ensure it operates as originally intended. (Finance Bill 2012)
• In-year repayments of tax to charities – The Government will legislate to amend CASC and Gift Aid legislation to ensure it operates as originally intended and to put on a statutory footing the practice by certain charities and CASCs of making claims for repayment of income tax including Gift Aid outside a tax return. (Finance Bill 2012)
• Self Assessment Donate – As announced at Budget 2011, from April 2012 the Government will withdraw Self Assessment Donate for tax returns for 2011–12 onwards. (Finance Bill 2012)
• Income tax and National Insurance contributions (NICs) reform – The Government will consult on integrating the operation of income tax and NICs after Budget 2012.
• VAT: revalorisation of registration and deregistration thresholds – From 1 April 2012 the VAT registration threshold will be increased from £73,000 to £77,000 and the deregistration threshold from £71,000 to £75,000.
• VAT zero-rated adapted motor vehicles and boats – HMRC will introduce a voluntary scheme for suppliers to report sales of for the use of wheelchair users.