The Chancellor today delivered Budget 2013. The Treasury’s Budget website can be accessed here while all the Budget documents are available here.

CTG welcomes a number of positive measures announced in today’s Budget that will help charities. Measures including announcements on digital giving, social investment tax relief and the Employment Allowance are a welcome step in the right direction. CTG looks forward to receiving more detail on each of these measures and working with the Treasury and HMRC to see their successful implementation for charities.

The information below is an interim update outlining the key announcement that charities should be aware of. CTG is seeking clarification on a number of issues from officials at HMRC, particularly on the timetable for various consultations and the estimated cost to the sector of different measures.. Following this and a more detailed analysis of the Budget documents, further briefing material will be circulated.

CTG welcomes the announcement that the Government will consult on proposals to make it easier to claim Gift Aid through a wide range of digital giving channels, including options for enabling donors to complete a single Gift Aid declaration to cover all their donations through a specific channel. CTG has been involved in early discussions with HM Treasury and is hopeful that a solution will be found to future proof the Gift Aid system for charities.

Other measures that CTG welcomes include:

Employment Allowance – Budget 2013 announces that from April 2014 every business and charity will be entitled to a £2,000 Employment Allowance towards their employer NICs bill. This is welcome news for many charities. CTG has spoken to HMRC which estimates that the Employment Allowance will be worth £45m to 35,000 charities.

Social investment tax relief – CTG is pleased that the Government will consult on the introduction of a new tax relief to encourage investment into social enterprises.

Increase to the VAT registration and deregistration thresholds will be increased in line with inflation so that with effect from 1 April 2013 the taxable turnover threshold which determines whether a person must be registered for VAT, will be increase from £77,000 to £79,000. This will help charities that do not wish to register for VAT to avoid creeping over the registration threshold.

Although the Budget has a number of positive outcomes for charities, CTG is concerned about a number of the announcements:

The removal of business research supplied between eligible bodies from the scope of the exemption for education is an unwelcome development, particularly in the present economic climate. However, we recognise that this is the inevitable result of case law decided by the European Court of Justice some years ago and could not have been successfully resisted by the UK Government. HMRC had been discussing this matter confidentially with Charity Tax Group since early 2012 and CTG has made the following key recommendations in its response to the recent HMRC consultation:

1. HMRC must provide clear guidance as to what is considered to be research funded by a grant, and therefore outside the scope of VAT, and research services provided for consideration which are no longer exempt.
2. HMRC must give clear guidance to the research sector as to what it will accept as evidence that a collaborative relationship exists (that is outside the scope) in the absence of a joint funding application and award.
3. Transitional relief is essential for research programmes that commence prior to 1 August 2013.

We are glad that the Treasury has committed to looking at transitional relief. A significant number of research programmes will be for 3 to 7 years, or longer, for which funding will have been obtained on the basis of VAT exempt supplies of research services. The imposition of VAT on future costs could mean the research has to be curtailed if additional funding cannot be found.

Withdrawal of charitable buildings from the scope of the VAT reduced rate for the supply and installation of energy-saving materials – the confirmation of this measure, which was announced in Budget 2012, is unwelcome as it will result in additional costs for charities.