CTG Newsletter – 10 February 2020

Influencing policy on charity taxation

CTG Budget submission

The Charity Tax Group (CTG) has published a letter that was sent to the Chancellor, outlining representations on a range of tax issues, in advance of Budget 2020. The Chancellor will publish the Budget on 11 March 2020.

In the submission, CTG calls on the Government to:

Commit to a strategic review of the future VAT system with the aim of reducing the irrecoverable VAT charities currently incur
Confirm that digital advertising by charities is eligible for a VAT zero rate within the current law
Extend VAT zero rating to electronic publications produced and purchased by charities
Prioritise resolution of discussions between HMRC and Facebook approving Gift Aid claims on donations received by Facebook (and other fundraising platforms)
Increase the non-primary purpose trading limit (miscellaneous income) from £80k
Confirm that the forthcoming review of business rates in England will protect existing charitable reliefs
Consider tax credits to stimulate the funding of bio-medical research by charities, similar to those provided to investor owned research companies
Commit to no further increases in Insurance Premium Tax (IPT) for charities and consider targeted relief where the insurance is required for activities or premises directly related to a charity’s objects
Allow Apprenticeship Levy funds to be used towards the costs of training volunteers.

OTS: Claims and elections review scoping document

The Office of Tax Simplification (OTS) has published a scoping document that aims to identify opportunities for simplification, both in relation to claims or elections presently needed for certain reliefs or exemptions, as well as the processes involved. The OTS will publish a call for evidence shortly and intends to publish a report outlining its findings in Autumn 2020.

While the primary focus of the scoping review is not on charity related issues, there is a general request for feedback on other taxes. Charities are required to opt-in/make claims for number of tax reliefs, including claims for Gift Aid and issuing zero/reduced rate VAT certificates so simplification could really help. OTS Tax Director, Bill Dodwell, has indicated that he would be happy to engage with CTG on these points. However, we understand that claiming business rates is outside of the scope of this review, but it is another administrative burden for charities as claims have to be made separately to each local authority.

Off-payroll working

The Government has announced that off-payroll working rules will now apply only to payments made for services provided on or after 6 April 2020. This was among a number of the proposals discussed at a HM Treasury stakeholder meeting that CTG participated in, as part of a Government review into the implementation of the off-payroll working rules.

The Government stated that a common issue raised over the course of the review into off-payroll working has been businesses’ concerns over what payments the rules apply to and from when. Previously, the rules would have applied to any payments made on or after 6 April 2020, regardless of when the services were carried out. The change means that organisations will only need to determine whether the rules apply for contracts they plan to continue beyond 6 April 2020.

Separately, the House of Lords Finance Bill Sub-Committee has launched an inquiry into government plans to introduce off-payroll working rules for the private sector, with concerns about whether the impact has been fully assessed

Scottish Budget 2020-2021

The Scottish Government unveiled its Budget 2020-2021 on Thursday. As part of the Budget the Office of the Scottish Charity Regulator was set a budget of £3.3m for 2019-20 and 2020-21, an increase of £0.3m on 2018-19’s budget. The Third Sector budget was increased to £24.9m in 2019-20 compared to 2018-19’s budget of £24.5m, but then decreases to £24.6m in 2020-21. No substantive changes to income tax rates or bands were announced, while there were some changes to the ratable valuation calculations for business rates

Making Tax Digital seminar

As charities enter their soft-landing period for Making Tax Digital, the introduction of digital VAT filing continues to present a challenge for charities of all sizes. Civil Society has invited CTG members to participate in a free webinar, on 19 January, 12.30-13.30, which will include a reminder of the rules, and analysis of the administrative and software requirements that charities must put in place. There will be a chance to put questions to Verna Gellvear, HMRC’s External Stakeholder Lead for the Making Tax Digital for Business Programme – if you have any specific questions please contact info@charitytaxgroup.org.uk and we will pass these on to the organisers. You can register for this free event using this link https://www.civilsociety.co.uk/events/making-tax-digital-navigating-the-soft-landing-period.html.

Gift Aid working group

CTG’s Gift Aid practical issues working group is holding its first meeting of the year this afternoon, with over 30 charities in attendance. Topics on the agenda include

Updates on GDPR and Gift Aid including data protection in relation to third party fundraising platforms
Facebook Donate
Gift Aid and “paying in” webpages/fundraising materials – developments since the last meeting with HMRC
Audit trail Gift Aid and text giving – developments since the last meeting with AIMM
Future of Gift Aid working group – proof of concept on integrating Gift Aid into the payments architecture
Fundraising Code – one page briefing on donor benefits
Opportunity for feedback from group members on HMRC Gift Aid audits and any other issues being raised with/by HMRC
Retail Gift Aid letters – £20 de minimis

If your charity would like to register for the dedicated Gift Aid working group mailing list, please contact info@charitytaxgroup.org.uk.

Round-up of topical developments

Employment Allowance guidance: Further to CTG’s update on Employment Allowance in the last newsletter, HMRC has published guidance on the changes to Employment Allowance. From April 2020 charities will need to make extra checks to find out if they are eligible to claim Employment Allowance, including checking de minimis state aid rules. Charities will continue to claim Employment Allowance through their Employer Payment Summary, but claims will not renew and charities will need to make a new claim for Employment Allowance each year.
Updated Employment Status Manual: HMRC has revised the Employment Status Manual to reflect the changes that are due to be introduced to the off-payroll working rules in April 2020. The draft provides details as to how the changes are intended to work in practice and has been published to further support organisations prepare for the changes. It provides details on the use of reasonable care, status determination statements, the client-disagreement process and outsourced services.
Apprenticeship Levy briefing: The House of Commons Library has published a briefing on the effectiveness of the Apprenticeship Levy. The briefing precedes a Westminster Hall debate on the issue on Tuesday 11 February. The briefing notes that since the levy was introduced the number of apprenticeship starts have fallen, in contradiction to Government claims that it would “allow [the Government] to double investment in apprenticeships by 2020 from 2010 levels, to £2.5bn [per year]”. CTG highlighted concerns about the use of levy funds by charities in its Budget submission.
Updated Capital Gains Manual: HMRC has updated guidance within the Capital Gains Manual, specifically the sections on trusts, bare trusts, disposals by trustees, and the basic terms of trust law.
House of Lords debate the Cairncross Review: The House of Lords held a short debate on what steps the Government are taking in response to Review – . During the debate Baroness Bonham-Carter of Yarnbury urged the Government to remove VAT on digital news publications and e-books.
Theatre Tax Relief: HMRC has published guidance on claiming Theatre Tax Relief for Corporation Tax.

Support the Charity Tax Group in 2020

The Charity Tax Group is funded by voluntary donations from charities and subscriptions from professional members. Throughout its history, CTG’s work on behalf of the whole sector have effectively been subsidised by a small group of charities that make a donation each year. To ensure the long-term sustainability of CTG and to grow its work, we need as many charities as possible to make a financial contribution.

If your charity has found CTG newsletters and events useful and want to demonstrate your support our lobbying work on behalf of the sector, please consider a donation for 2020.

On average smaller charities donate £200-£400, medium size charities donate £400-£800 and larger charities donate over £800 a year. Any contribution, however large or small, makes a big difference towards our work. If you are not sure whether your charity currently makes a regular donation, please let us know and we will be happy to tell you. A donation form can be downloaded here.

Financial support is of course very helpful, but we also rely on members for feedback to consultation and to help shape our policy work and representations to Government. If you have any questions about CTG’s work or would like to get more involved, please do not hesitate to contact us at info@charitytaxgroup.org.uk.

Resources

CTG has published a summary of its work over the last ten years, highlighting the impact of its representations, against a backdrop of austerity, Brexit, devolution and a Merry-Go-Round of charity tax ministers. You can also read a more detailed summary of charity tax developments and CTG’s work on behalf of members in 2019 here.

A full archive of CTG commentaries can be found here. If you would like to write a commentary for CTG, please get in touch. Recent newsletters can be accessed here and the updated VAT case law tracker can be read here.

CTG has published a Making Tax Digital (MTD) “mythbuster” for charities, addressing common misconceptions. In addition, following representations by CTG, HMRC has published an updated sign-up timeline for organisations (including charities) that had their MTD mandated start date deferred until October 2019.

A reminder that CTG now has a provisional date for the 2020 Tax Conference – Wednesday 20 May 2020, at the Wellcome Trust, in London. Further details will be confirmed soon.

If you have been forwarded this e-mail and would like to receive it directly, please register here