CTG Newsletter – 2 December 2019

OECD: Global Anti-Base Erosion Proposal – Pillar Two

A reminder that the OECD consultation on its Pillar Two Global Anti-Base Erosion Proposal closes at 18.00 today (2 December 2019). Please send any comments to info@charitytaxgroup.org.uk ASAP.

Pillar Two focuses on the base erosion and profit shifting issues that Pillar One does not, and aims to equip jurisdictions with a right to “tax back” when other jurisdictions have not exercised their primary taxing rights, or the payment is otherwise subject to low levels of effective taxation.

The consultation, focusing on three main issues, considers:

the extent to which financial accounts can determine the tax base
the extent to which multinationals can combine income and taxes from different sources to determine the effective (blended) tax rate
what carve-outs and thresholds should be considered.

Whereas Pillar 1 was targeting international business activities, there is a risk that the proposals in Pillar 2 could be applied to any multinational entity (MNE), whether engaged in business activities or not, without a suitable carve-out. Bearing in mind that the OECD’s definition of a MNE for country-by-country (CbC) reporting purposes covers any entity with one or more branches or subsidiaries in another territory, several of the proposals in the Programme of Work set out in Annex B are potentially troubling for charities and other tax-exempt entities:

an income inclusion rule
the imposition of a minimum or blended income tax rate
a tax charge on payments that are deemed to erode the tax base because they are “undertaxed” or not “subject to tax”.

Although the Programme of Work calls for consideration to be given to the appropriateness of carve-outs for specific sectors, it does not suggest that any sector deserves a carve-out. CTG is finalising a submission making the case for the charity sector, but we need your feedback in support of this.

Corporate Criminal Offence – guidance for incorporated small charities

Failure to prevent tax evasion is a serious criminal offence. Small charities may well believe they have no risk but this is not so if they are incorporated. From 2017, a new Corporate Criminal Offence of “Failure to prevent the criminal facilitation of tax evasion” impacts on all incorporated charities of whatever size (this includes charities registered as companies and charitable incorporated organisations). Incorporated small charities need to take action now. Doing nothing is not an option.

A briefing on this important issue can be accessed here and is reproduced in full below. This briefing was prepared by Trevor James (Association of Church Accountants and Treasurers) and Richard Baldwin (Sport and Recreation Alliance), following discussions at the Charity Tax Forum, and is hosted on the CTG website with their permission and at HMRC’s suggestion. Tailored guidance for churches and sports clubs is also available.

We would encourage CTG members to share this guidance within their networks. If your charity would be willing to provide feedback on the steps it has taken to comply with this guidance, please contact info@charitytaxgroup.org.uk.

Data Protection and Third Party Fundraising Platforms

When a charity receives donations through a third party platform (including Facebook Donate) and wishes to use the personal data of those donors for any purpose (including Gift Aid), rules must be in place to ensure that the processing is compliant with GDPR rules. Zoe Rowland,Head of Data Governance at Cancer Research UK, prepared a helpful commentary for the Gift Aid working group, which we are now able to share with all members. Add your comments and questions and join the conversation.

As reported previously, it is possible to add Gift Aid to eligible donations via Facebook Donate. However, there has been some uncertainty as to whether HMRC would accept Gift Aid claims on donations received via Facebook due to concerns about the audit trail. For this reason HMRC has suggested that charities do not process claims Gift Aid claims on Facebook Donations at this time. This is a crucial issue worth over £2.5m already to just 15 working group members. CTG has therefore been working hard to facilitate a meeting between Facebook and HMRC to resolve this issue, which is due to take place shortly. Read more here.

Policy issues briefing

Following the recent CTG Observer Member’s meeting, a short briefing has been produced with updates on current policy issues and links for more detailed summaries on the CTG website. This briefing can be accessed by all members here.

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.

Election manifestos published – tax proposals

In advance of the general election on 12 December 2019, the major political parties have published their election manifestos. CTG has collated the various finance/tax proposals that have been made here. This page has now been updated to include proposals from the Scottish National Party. If you have any comments or queries, please contact info@charitytaxgroup.org.uk.

Support the Charity Tax Group

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 2019 (and a donation form can be found here), or provision for a contribution in your budget 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.

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 an initial representative sample of charities and we hope that the organisations selected will be able to complete this survey.

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.

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