The Charity Tax Group (CTG) today welcomed some positive announcements for the charity sector in the 2015 Budget but is keen to ensure that charities are not adversely affected by a number of forthcoming tax reviews.

CTG Chairman, John Hemming, commented

“Overall this is a positive Budget for charities. We are particularly pleased that there will be a further VAT refund schemes for another part of the charity sector – blood bike charities – which builds on the refund scheme for search and rescue charities and hospices which will come into effect on 1 April 2015.  CTG has been heavily involved in campaigning for VAT refunds for charities and is delighted that an important precedent has now been set for wider refund schemes for the sector.

“We had campaigned hard in the run-up to the Budget on the new Diverted Profits Tax, the details of which will be published next week.  We welcome the announcement today that civil society organisations will not be affected and that there will be specific exclusions from the tax.  We are confident that the Treasury has listened to our concerns on this point – if a charity exclusion had not been built-in the use by charities of trading subsidiaries would no longer have been an option.

“The increase in from £5,000 to £8,000 in the amount that can be donated under the GASDS scheme is also very welcome and we believe that this will increase awareness of the scheme, particularly among larger charities.  The promised review of the scheme in 2016 needs to look at how the scheme works, particularly for small charities, for whom the eligibility requirements are too strict, but this increase demonstrates the Government’s commitment to making it as effective as possible – we hope this positive approach will be carried forward in next year’s review. 

“Although there have been reassurances that the business rates review is not targeting charities, we will be working with others across the sector to ensure that this vitally-important relief for charities is protected.  The Chancellor announced another review that will be important to charities – into Deeds of Variation.  We have been assured by the Treasury that the proposed cap on reliefs for serial avoiders will not affect charities but we will be monitoring this closely to ensure that there is not a repeat of the charity tax cap problems.” 

 Summary of policy announcements

 Gift Aid Small Donations Scheme (GASDS)

Secondary legislation will be introduced to increase the maximum annual donation amount which can be claimed through the GASDS to £8,000, allowing charities and Community Amateur Sports Clubs to claim Gift Aid style top-up payments of up to £2,000 a year – this will take effect from April 2016 and will, we understand, apply to the eligible community buildings.  We have been told by officials that raising awareness of the scheme is one of the drivers behind the increase in the amount that can be claimed.  As of December 2014, only £23m had been claimed, which was below the Government’s original projection of £50m. 

When the scheme is reviewed in 2016, CTG will be urging the Government to remove the requirement for a charity to have a two-year Gift Aid history before becoming eligible for the Scheme.  We also want the connected charities rules to be reconsidered and the restriction to cash payments only reviewed.

VAT refunds

As announced at Autumn Statement 2014, hospice charities will be eligible for VAT refunds from 1 April 2015 and this will be legislated for in Finance Bill 2015. Similarly search and rescue, and air ambulance charities will be eligible for VAT refunds from 1 April 2015 and again this will be legislated for in Finance Bill 2015. CTG welcomes the news that from 1 April 2015, blood bike charities will be eligible for a  VAT refund scheme.  CTG has been working on this issue for the past thirty years and believes that these refund schemes establish an important precedent for the sector.

Diverted Profits Tax

As announced at Autumn Statement 2014, legislation will be introduced in Finance Bill 2015 for a new tax on diverted profits from 1 April 2015. Following consultation, the legislation has been revised to narrow the notification requirement. There have also been changes to clarify rules for giving credit for tax paid, the operation of the conditions under which a charge can arise and specific exclusions (which we are confident will include a specific exemption for charities).

Gift Aid reform

As announced at Autumn Statement 2014, the Government will legislate to allow regulations to be made to give intermediaries a greater role in administering Gift Aid.  As a member of the HMRC Charity Tax Forum Gift Aid working group, CTG is also working with officials on proposals to reform the Gift Aid Declaration and to improve the Gift Aid donor benefit rules.

Business rates

The review of business rates announced in 2014’s Autumn Statement was published two days before the Budget. The terms of reference have now been published and, following discussions with HM Treasury officials, CTG can confirm that this review is not aimed at the vast majority of charities.  There will, however, be a need for the sector to demonstrate the huge importance of rate reliefs to charities. Responses to the consultation are required by 12 June 2015.

Subsidised fundraising training

The Office for Civil Society will take forward the procurement of a partner to deliver subsidised fundraising training to small charities in 2015-16 building on the previous scheme run with the Institute of Fundraising.

Revalorisation of the VAT registration and deregistration thresholds

From 1 April 2015 the VAT registration threshold will be increased from £81,000 to £82,000 and the deregistration threshold from £79,000 to £80,000.

Charitable status of certain bodies

Legislation will be introduced in Finance Bill 2015 to ensure that the Commonwealth War Graves Commission and Imperial War Graves Endowment Fund trustees continue to be treated as charities for tax purposes.

Charity Authorised Investment Funds

The Government is working with the Financial Conduct Authority (FCA), the Charity Investors’ Group and the Charity Commission to introduce a new Charity Authorised Investment Fund structure that will bring new investment funds established for charitable purposes under FCA regulation, ensuring they receive the same regulatory oversight and protections as funds for retail investors.

Other grants

The Government will provide a grant to support charities providing rapid response vehicles for medical purposes. The Government has committed £75 million of LIBOR fines over the next 5 years to support military charities and other good causes.

The Government has also announced Church Roof Repair Fund a further £40 million funding to the Listed Places of Worship – Roof Repair Fund to support vital roof repairs undertaken between 2015 and 2017.

Simplification of employee benefits and expenses

As announced at Autumn Statement 2014, the Government will simplify the administration of employee benefits and expenses. From April 2015 the Government will provide a statutory exemption for trivial benefits in kind costing less than £50. Following technical consultation, an annual cap of £300 will also be introduced for office holders of close companies and employees who are family members of those office holders. From April 2016, the Government will remove the £8,500 threshold below which employees do not pay Income Tax on certain benefits in kind and replace it with new exemptions for carers and for ministers of religion. It will also exempt certain reimbursed expenses and introduce a statutory framework for voluntary payrolling. The new exemption for reimbursed expenses will not be available if used in conjunction with salary sacrifice.

Serial avoiders

The Government will introduce legislation for tougher measures for those who persistently enter into tax avoidance schemes which fail (serial avoiders), including a special reporting requirement and a surcharge on those whose latest tax return is inaccurate as a result of a further failed avoidance scheme. The Government will also look to restrict access to reliefs for the minority who have a record of trying to abuse them through avoidance schemes that don’t work and intends to develop further measures to name those who continue to use schemes that fail. Legislation will be introduced in due course that will widen the current scope of the Promoters of Tax Avoidance Schemes regime by bringing in promoters whose schemes regularly fail.

Inheritance tax

The Government will review the use of deeds of variation for tax purposes. As announced at Autumn Statement 2014, the Government will also extend the existing IHT exemption for members of the armed forces whose death is caused or hastened by injury while on active service to members of the emergency services and humanitarian aid workers responding to emergency circumstances. It will have effect for deaths on or after 19 March 2014.

Corporation Tax: orchestra tax relief

The Government will provide tax relief to orchestras at a rate of 25% on qualifying expenditure from 1 April 2016. The Government has consulted on the design of the relief and a summary of responses will be published shortly.

Income Tax personal allowances

As announced at Autumn Statement 2014, the Government will increase the Income Tax personal allowance to £10,600 from April 2015. The basic rate limit will be £31,785 so the higher rate threshold above which individuals pay Income Tax at 40% will be increased to £42,385. The National Insurance upper earnings and upper profits limits will increase to stay in line with the higher rate threshold. The basic, higher and additional rates of Income Tax for 2015-16 will remain at their 2014-15 levels.

The Government will increase the Income Tax personal allowance to £10,800 in 2016-17 and £11,000 in 2017-18. In 2016-17 the basic rate limit will be £31,900 meaning that the higher rate threshold above which individuals pay income tax at 40% will be increased to £42,700. In 2017-18 the higher rate threshold will be £43,300. The National Insurance upper earnings and upper profits limits will increase to stay in line with the higher rate threshold.