CTG Newsletter – 20 January 2020

Influencing policy on charity taxation

Budget representations

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.

Policy issues update

The Charity Tax Group (CTG) is currently working on and monitoring a wide range of policy issues for members. An overview of recent developments and current issues can be found in this policy briefing. Key activities for CTG in 2020 include

Quantifying the value of VAT reliefs to the sector and their wider socio-economic impact
Working to unlock the millions of pounds of Gift Aid that cannot yet be claimed though Facebook Donate
Leading a legal challenge to the VAT treatment of online advertising – which is costing the charity sector tens of millions of pounds
Helping charities to prepare for the next phase of Making Tax Digital and IR35/off-payroll working
Leading work on the future of Gift Aid to maximise Gift Aid returns from contactless gifts and unlock the potential Gift Aid from new payment technologies
Working to protect charity business rates relief – the most valuable tax relief for charities worth £2bn+ per annum
Calling for the extension of the VAT zero rate for e-publications
Working to secure greater flexibility in the application of the VAT RCP rules
Protecting charities from disproportionate national and international tax reporting requirements.
Clarifying the correct VAT treatment of DfID and other humanitarian/research funding.

Off-payroll working rules review

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.

The Government recently 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 participated in a stakeholder roundtable meeting with HMRC on 15 January 2020, alongside representatives of the retail, logistics, healthcare and media sectors. Presentation slides from that session can be read here (but should not be shared publicly/on social media). CTG representatives relayed feedback/questions from members and we expect a more detailed response shortly. CTG also asked HMRC officials to consider a “soft-landing” period in respect of compliance, to enable charities to make the transition to new reporting requirements without the fear of penalties. CTG also called for more tailored guidance for charities and a mythbuster. Officials indicated that affected organisations should be receiving letters from HMRC at some point soon, as well as briefing directly from their CCM’s (where relevant).

We would still welcome feedback from charities on whether any 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.

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.

Round up of other topical developments

Charity Tax Forum: The minutes of the HMRC Charity Tax Forum meeting on 14 October 2019 have been published, including updates on Making Tax Digital, Brexit, Off-payroll working and charity tax statistics. Read more here.
University of Cambridge case on VAT and investment management fees: CTG understands that the Court of Appeal wrote to the University recently to state that it does not consider it necessary to issue a judgment, following the ruling by the CJEU – a detailed commentary on that ruling can be read here. HMRC officials had previously indicated to CTG that they were waiting on a Court of Appeal judgment before commenting on the implications of the case, so we await HMRC’s next steps. Until then charities that can say that their funds are partly or wholly created from earned income, rather than donated income, may be able to conclude that decision cannot be assumed to apply to them until HMRC issues its view on the litigation. Charities would be advised to discuss this with their professional advisors before taking any further action.
Geographical distribution of Gift Aid: A report by New Philanthropy Capital on the distribution and impact of charities across England includes a recommendation that the Government should look at the charity tax system, especially Gift Aid and consider how it can help ‘left behind’ areas. This follows data in the Charity Tax Commission report that found that Gift Aid claims were concentrated in the south of England. While the intentions are laudable, CTG has always expressed concern at any proposals to redistribute Gift Aid, arguing that there are more appropriate mechanisms available. A central tenet of Gift Aid is the link between the donor and the tax they have paid to cover the Gift Aid claim – any disruption in this link risks the relief being classified as public expenditure and subject to change. It is also important to remember that Gift Aid will always be highest where there are most donations and many national charities process Gift Aid claims at a London HQ, despite the donations being made locally, in other parts of the country.
Tax and crypto-currencies: The US Internal Revenue Service (IRS) has issued guidance for donors (and charities) on the FAQ page of its website. Charities and advisers will recall that HMRC published its own guidance at the end of 2019 advising that if a company disposes of exchange tokens to charity, they will not have to pay Corporation Tax on any gain that has accrued. No tax relief is currently available in the UK for donations of crypto-currencies to charities by individuals, but this will be something to monitor going forward. Has your charity received a donation of crypto-currencies (including bitcoin)? Let us know at info@charitytaxgroup.org.uk.
Fundraising reporting requirements: The Fundraising Regulator has published new guidance to help charities fully comply with the fundraising reporting requirements in the Charities (Protection and Social Investment) Act 2016.

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.

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.

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