CTG Newsletter – 8 January 2020

Happy New Year to all members. We look forward to working with you in 2020.

Influencing policy on charity taxation

Budget 2020

The Chancellor has confirmed that the next 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. Submissions can also be made via BudgetSubmissions@hmtreasury.gov.uk.

CTG will provide detailed coverage of the Budget announcement on the day. We will also be preparing a Budget submission – please send any comments or suggestions to info@charitytaxgroup.org.uk.

Recent successes/future challenges

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.

This year, priorities include:

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 £x per annum
Calling for the extension of the VAT zero rate for e-publications.

We also want to hear from members about their tax priorities and any innovative solutions they would like to propose. Send us your thoughts to info@charitytaxgroup.org.uk.

Review of the implementation of IR35/Off-payroll working rules

The Government is launching a review of changes to off-payroll working rules 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). The review will determine if any further steps can be taken to ensure the smooth and successful implementation of the reforms, which are due to come into force in April 2020. Read more here. HMRC is currently running webinars on the IR35 changes here.

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.

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.

Please complete the CTG VAT survey

The deadline for responses to CTG’s national VAT research survey is 10 January 2020 (for those charities approached in the first round). 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

VAT and e-newspapers: The Upper Tribunal has supported an appeal by News Corp that electronic newspapers are eligible for VAT zero rating. Further details on the judgment can be found here. However, it seems likely that HMRC will appeal the decision and it remains to be seen whether the ruling be read across to other electronic publications. Nevertheless, it is a positive development consistent with moves at a policy level in the EU to support reduced and zero rates for e-publications where the equivalent exists for physical publications. CTG will be monitoring developments and providing further commentary on the case in due course.
Employer provided living accommodation: HMRC has consolidated its guidance on How to tax living accommodation given to employees. This includes information on the exemption that means that no tax charges for the provision of living accommodation will arise where:
- It’s necessary for the proper performance of the employee’s duties that they should reside in the accommodation.
- The accommodation is provided for the better performance of the employee’s duties and the employment is one of the kinds for which it’s customary for employers to provide accommodation for the employee.
Changes to tax rules for call off stock arrangements between Member States: HMRC has published an explanation of changes to EU Law relating to the VAT rules for cross-border transactions between member states, and publishes draft legislation and guidance. The Government intends to include this measure in the next Finance Act. The measure will apply, subject to the conditions in the legislation, in cases where goods are removed from an EU country on or after 1 January 2020 (the legislation will therefore have a retrospective element). This means that businesses will be able to take advantage of the new arrangements from 1 January 2020. Read more here.
Guidance on VAT and vouchers: HMRC has published updated guidance on gifts of goods and vouchers.The technical content of section 8 has been updated to take account of developments in both law and policy on vouchers. Section 9 has been added on the treatment of vouchers issued after 1 January 2019. Any charities that issue vouchers or gift cards may want to review this guidance.
Gift Aid fraud foiled: No. 8 on the HMRC’s list of top fraudsters caught in 2019 was a charity treasurer who tried to steal £330k+ in a Gift Aid repayment fraud and spent the money on lavish holidays. This shows the need for the sector to protect the integrity of Gift Aid, but also that existing HMRC safeguards are working well.
National Living Wage: The Government has confirmed that the new rate will start on 1 April 2020 and will result in an increase of £930 annually for 2.8 million full-time workers on the NLW. This is an increase of 6.2% to £8.72 per hour (NB this figure applies to over 25 year-olds).
5MLD/Trust Registration Service: The Association of Tax Technicians (ATT) reported in DEcember that HMRC had confirmed to them that detailed consultation on implications of 5MLD on the Trust Register will take place in early 2020. Further information on the proposals to date can be found here.
Business rates revaluation in Northern Ireland: Organisations can check their rating valuation on the Reval2020 list.
Cultural Gifts Scheme/IHT relief: A local newspaper has reported a positive news story about the use of the Scheme, with a proportion of the tax relief also expected to be gifted to charity. Separately, it has been reported that six Rembrandts were donated to the Arts Council (and given to the Ulster Museum) to settle a £150k IHT bill.
Applying for an exemption from Making Tax Digital: Most VAT registered businesses with a taxable turnover above £85,000 must follow the rules for Making Tax Digital for VAT. However you can apply for an exemption if it is not reasonable or practical for you to use computers, software or the internet to follow the rules for Making Tax Digital for VAT. This could be because: of your age, a disability or where you live; you object to using computers on religious grounds; or any other reason why it’s not reasonable or practical. HMRC has now published stand-alone guidance on applying for an exemption.

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.

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.

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.

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