CTG Newsletter – 14 January 2020

Influencing policy on charity taxation

UK and Scottish Budgets

A reminder that the Chancellor has confirmed that the next UK Budget will be held on Wednesday 11 March 2020. The Budget 2020 representations portal is now open and HM Treasury is accepting representations until 7 February 2020. Please send any comments or suggestions to info@charitytaxgroup.org.uk before the deadline.

Separately Scottish Government Finance Secretary, Derek Mackay MSP, has announced that the Scottish Budget is confirmed for 6 February 2020.

Request for urgent feedback on changes to off-payroll working rules

Last week the Government launched a review of changes to off-payroll working rules (from April 2020) to address any concerns from businesses and affected individuals about how they will be implemented (this is not a consultation on whether it will happen or not).

CTG has been invited to participate in a stakeholder roundtable meeting with HMRC on 15 January (plenty of notice as usual!) CTG has already secured clarification on the turnover test for charities, but we would welcome feedback from charities on whether other changes to the implementation of these rules would be helpful. This is an important opportunity to influence the implementation of these rules. Please send any comments to info@charitytaxgroup.org.uk ASAP.

Compliance with new off-payroll working rules will be a major change for the largest charities when it is introduced. Affected charities should already be preparing for this important development. Detailed guidance can be found here and members may be interested in a short overview on the issue by CTG Vice-Chairman Richard Bray here.

Also, HMRC has updated its guidance on the extension of existing off-payroll working rules (IR35) to the private sector, scheduled for April, with a new contractor factsheet setting out the changes

VAT zero rate for reading material

CTG reported last week that the Upper Tribunal has supported an appeal by News Corp that electronic newspapers are eligible for VAT zero rating. CTG’s Technical Adviser Graham Elliott has produced a new commentary focusing on a number of practical considerations for charities that arise from the fact of this decision and the litigation overall.

5MLD/Trust Registration Service developments

The EU’s Fifth Money Laundering Directive (5MLD) was transposed into UK law by regulations published just days before Christmas. The money laundering and terrorist financing (amendment) regulations 2019 (MLRs) came into force on 10 January 2020, updating existing regulations. An HMRC policy paper on the regulations, is reproduced in full on the CTG website. A commentary on the proposals to date can also be found here.

As outlined, in the commentary, there had been concerns about the proposed changes to the Trust Registration Service, with further consultation planned. However, as noted by the Law Society:

“While there had been indication via the consultation paper that there may be changes to the trust registration regime, these have not been included in this legislation. We anticipate HM Government may seek to implement changes at another time”.

CTG will maintain a watching brief and seek further updates at the next HMRC Charity Tax Forum meeting in February.

Round-up of topical developments

Retail Gift Aid letters – £20 de minimis limit: Members will recall that the Government has introduced a non-mandatory £20 de minimis limit for letters to donors, for charities operating methods A or B of the Retail Gift Aid scheme. Currently, a letter must be issued annually making the donor aware that they are responsible for the tax to cover, regardless of the amount of net If a charity decides to adopt the new limit, then from April 2019, a letter only need to be issued once net sales have reach £20, or every three years, whichever comes first. There is a brief mention of this new process in the HMRC guidance, but officials have informed us that there is currently no resource available to provide a more detailed overview. In the meantime, CTG has details of worked examples and HMRC FAQs on its website and hopes to provide template letters to members shortly.
Business rates appeal affecting museums dismissed: An appeal by the Valuation Office Agency against the Royal Albert Memorial Museum (RAMM) and Art Gallery in Exeter has been dismissed by the Upper Tribunal (Land Chambers). This litigation follows the important York Museums case from 2017. CTG will shortly be publishing further commentary on the Exeter case and the wider implications for the sector.
Charity business rates local press coverage: Unfortunately, there have been a number of negative local press stories relating to charity business rates relief. In some cases, the reporting or local councils involved are ill informed or unhelpful, but it does show the need to ensure that business rates reliefs are claimed correctly as there is a tendency to question their validity in some quarters.
- Councils are losing some £250m a year through business rates avoidance, equivalent to 1.0% of the total of this income source: That claim has come from the Local Government Association (LGA) in its survey of business rates avoidance, which said legislation is needed to tackle this problem in England along similar lines to those proposed in Scotland. Repeated short-term periods of occupation was the most common method of avoidance found, and this also had the highest average loss at £396,000. The report found the second most common method of avoidance involved vacant properties leased to a charity with the next use purported to be wholly or mainly charitable, with an average loss of £153,000. The LGA called for councils to get new legal powers to enter and inspect non-domestic properties to verify information relevant to billing.
- University of Bristol under fire after being deemed not liable for £5m in business rates: Investigations are under way to confirm the council is billing correctly for two university premises following concerns raised by local councillors. The university says it does not profit from the buildings which are principally used for “core university business” and that overall the organisation contributes nearly £1billion to Bristol’s annual economic output.
- Council left £120k out of pocket after charity claimed business rates relief: A charity which claimed business rates relief left a Suffolk council nearly £120,000 out of pocket when it ceased trading and was dissolved, a report has revealed. There had been a court case about eligibility for rates relief, which the charity had lost, but the charity was then wound up before all outstanding rates had been collected.
Gambling and credit cards: The Gambling Commission has announced a ban (from April 2020) on gambling businesses allowing consumers in Great Britain to use credit cards to gamble. The ban will not extend to non-remote lotteries (where payment is made face-to face) or National Lottery and society lottery tickets and scratchcards bought in supermarkets and newsagents as part of a wider shopping basket.
Review of RPI: The Chancellor has written to the chair of the House of Lords Economic Affairs Committee announcing that the joint consultation between the Government and UK Statistics Authority (UKSA) on a proposed change to address the shortcomings in the Retail Prices Index (RPI) will now launch at Budget 2020 and run for six weeks.

Support the Charity Tax Group in 2020

We will be contacting subscribers to the newsletter shortly to request your support for our work in 2020. 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. Any contribution, however large or small, makes a big difference towards our work. If your organisation has never made a donation to the Charity Tax Group 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.

Members will recall that CTG received a letter from HMRC officials, in October 2019, outlining their view on the VAT treatment of social media advertising. CTG disagrees with this view and is considering possible next steps, following discussions with charities and agencies. If your charity would be interested in supporting a possible challenge to HMRC’s position, please contact info@charitytaxgroup.org.uk to receive a confidential briefing.

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