CTG Newsletter – 19 December 2019

The Charity Tax Group (CTG) wishes all members a Merry Christmas and we look forward to working with you in 2020. Thank you for your continued support.

Election round-up and the Queen’s Speech

Following the general election on 12 December 2019, the Conservative Party has secured a parliamentary majority. This significantly increases the likelihood of his Brexit deal navigating through parliament (by the end of January 2020), although the details of future trade deals will need to be negotiated, in principle before the end of the implementation period at the end of 2020.

There was a mini reshuffle on 16 December 2019, although outgoing MP Nicky Morgan retained her position as Culture Secretary, following appointment to the House of Lords. A wider re-shuffle is expected after the Brexit deal is through parliament. The Conservative Party manifesto includes the following proposals on finance and tax issues, some of which were referenced in the Queen’s Speech. The next Budget is expected to take place in February/March 2020.

The Queen’s Speech today outlined the forthcoming legislative agenda for the Government. The Government’s commitment to “conducting a fundamental review of business rates” [in England] is the most eye-catching of the charity tax announcements and will need to be monitored closely. The Government will also progress legislation to bring forward the next business rates revaluation [in England] by one year from 2022 to 2021 and move business rates revaluations from a five-yearly cycle to a three-yearly cycle. The Government will also set out further proposals to tackle tax evasion and avoidance. In good news for charity shops, the Government is committed to increasing the retail discount from one-third to 50 per cent (although this income is subject to State Aid restrictions). Read more here.

Review of the last decade – CTG secures important improvements to the tax system for charities

As the end of the decade approaches, CTG reflects on the considerable impact it made in the last ten years, against a backdrop of austerity, Brexit, devolution and a Merry-Go-Round of charity tax ministers.

Highlights include the development of the first Charity Tax Map that laid the foundations for our extensive online charity “taxopedia”. CTG has played a leading role in lobbying Government, helping to shape and improve Gift Aid and the Gift Aid Small Donations Scheme and challenging a proposal to introduce a cap on tax reliefs for charitable gifts. CTG has played an active role in protecting valuable business rate and VAT reliefs (including on design and build contracts) during an extended period of austerity, while also successfully creating a precedent for VAT refunds for charities.

During this period, CTG’s total running costs have been approximately £2m – a fraction of the savings secured for charities and great value for money given the return on investment for the sector.

You can also read a more detailed summary of charity tax developments and CTG’s work on behalf of members in 2019 here.

NHS Foundation Trusts not eligible for charity rates relief

A recent ruling has found that “Derby Teaching Hospitals NHS Foundation Trust [and, therefore, the other NHS Foundations Trusts] is not a charity for the purposes of section 43(6) of the Local Government Finance Act 1988” – so it is not eligible for the 80 per cent charity reduction.

A spokeswoman for the Charity Commission said it welcomed the decision noting:“This was a significant case: charity has a distinct status in law, and it also has a special meaning in the eyes of the public. It is crucial that this special status is protected for the benefit of the public.”

VAT and social media advertising

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.

Please complete the CTG VAT survey

CTG’s national VAT research survey has been launched. The survey is designed to gather information about the impact of the VAT system on the contribution charities are able to make on a sector by sector basis. The survey has now been sent by London Economics (from apercival@londoneconomics.co.uk) to most charity members and we hope that you will be able to complete this survey. Remember, you do not need to complete every question – any information that you can provide will be helpful.

Round-up of topical developments

Making Tax Digital survey: The CIOT and ATT have launched a survey on Making Tax Digital (MTD), looking back on how the roll out of MTD for VAT went, and looking ahead to other taxes. The survey is open to all agents and businesses. The survey closes on 31 December 2019.
Westlow Cricket Club case: A recent VAT tribunal case reminds sports clubs, and charities in general to take care when issuing a certificate to claim zero-rating on the construction of a new building. A summary of the case by RSM UK can be read here.
Making Tax Digital Agent Update: Issue 12 of HMRC’s Making Tax Digital for Agents update has been published. It includes information about MTD sign-up and details of reminders being sent to monthly customers (which will include some charities) with a deferred October start date.
Welsh local government funding: The Welsh Government has announced that as part of the local government settlement, local authorities will receive nearly £4.5bn in core revenue funding and non-domestic rates – an increase of £184m from 2019-20, on a like-for-like basis. Specific allocations include an additional £2.4m for authorities to provide additional discretionary rates relief for local businesses and other ratepayers to respond to specific local issues.
Tax reform and statistics: The Institute of Government has published a new paper “How to be a tax-reforming chancellor”. Separately the House of Commons Library has published an overview of tax statistics.
VAT and CASCs: Richard Baldwin, who CTG works closely with through HMRC’s Charity Tax Forum, has written an article with tax tips for not-for-profit sports clubs, focusing on how VAT impacts on facility improvements.
Scrutiny of charity business rates relief in Scotland: In a debate on the Non-Domestic Rates (Scotland) Bill (which will remove charity rates relief from mainstream independent schools) an MSP highlighted an example he had come across of a “furniture shop which had closed down because of a charitable shop nearby that sold furniture”, noting that the charity shop did not pay its staff, “as they were volunteers”, before saying:“That highlights the fact that the independent schools amendment, which we have dealt with, is about only one bit of the charitable sector. We have anecdotal evidence that charitable relief is having a serious impact on the viability of businesses. Is there not a case for a wider review of how charitable relief is applied?”.The Minister’s response was that it was “very fair comment” and she “would not dispute the need perhaps to have a broader look at how charitable relief is applied across the board”. She added that, “In a sense, charitable relief is similar to the small business bonus scheme. In other words, this is about identifying whether the policy is achieving its purposes or whether it is undermining the rest of the local economy”.
Welsh Government Draft Budget 2020-21: The Budget narrative repeated (para 4.21) the intention to “consult in the near future on the eligibility of independent schools and hospitals for charitable rates relief”. The document also notes: “From April this year, some £5bn of devolved and local tax revenue is raised in Wales and stays in Wales. This gives us the ability to consider how our tax policies can contribute to our wider ambitions for Welsh public services. We will not raise Welsh Rates of Income Tax in 2020. At this stage in the budget process I do not intend to make any changes to Land Transaction Tax rates and bands, but I will keep them under review”.

Support the Charity Tax Group 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. We appreciate that it is not always possible for charities to make a contribution, and if that is the case, this is useful to know so we do not contact you unnecessarily.

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

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.

CTG has updated its review of key charity tax developments since the start of 2019 (up to and including November 2019). Recent work has included a Gift Aid working group meeting with speakers from aimm and HMRC and discussions with HMRC and agencies on VAT and digital advertising.

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