CTG Newsletter – 9 December 2019

Don’t pay the VAT bill to your agency until you have taken professional advice!

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.

However, in the meantime many agencies are applying, or are already applying, VAT in line with the recommendations of the letter.  Charities need to take their own advice from their professional advisors as to what action they should take in these circumstances, particularly as HMRC is starting to raise assessments to recover VAT from some  agencies on the supplies that have been made to charities of social media advertising.  Following engagement with the advertising sector (including DMA and IPA) there is now greater awareness of this issue.  But in view of the significant costs that might be involved CTG encourages charity finance teams to ensure that they discuss the potential cost implications with their fundraising colleagues.  This should include the possibility of retrospective charging of VAT over the past four years.

If your charity would be interested in supporting a possible challenge to HMRC’s position, please contact info@charitytaxgroup.org.uk. A briefing meeting for charities will be taking place shortly for interested charities.

What to expect from a statutory review of an HMRC decision

As highlighted in the recent HMRC Agent Update (Issue 75) if HMRC makes an appealable decision and the taxpayer disagrees with it, they can have the decision reviewed. CTG has reproduced the HMRC summary of what to expect from a statutory review here.

The Agent Update also provides details of the Alternative Dispute Resolution (ADR) service, which involves an impartial HMRC mediator working with all parties to prevent unnecessary litigation.

OECD: Global Anti-Base Erosion Proposal – Pillar Two

The OECD consultation on its Pillar Two Global Anti-Base Erosion Proposal closes on 2 December 2019. 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.

In a response to the consultation, CTG confirmed that while it supports moves which tackle tax avoidance and abuse, it believes that it is also important that measures to tackle avoidance are proportionate and do not have an adverse impact on not for profit organisations like charities. CTG therefore proposed that a carve-out for charities would be appropriate. Other organisations, including BUFDG and ICAEW have also highlighted the importance of protecting charities. All stakeholder responses to the consultation can be read here.

Gift Aid education in fundraising materials

At the recent Gift Aid working group, an official from HMRC’s  Charities Outreach team attended to provide an update on the work his team had undertaken to improve Gift Aid education in fundraising materials. He noted that a number of charities had made changes to their websites and fundraising packs, but expressed particular concern about “pay in your fundraising” pages on charity websites that were not clear enough that Gift Aid was not eligible where the money being paid was not the donor’s own donation, but instead a collection. He confirmed that charities members could contact him if they wanted to discuss their fundraising materials (steven.carroll@hmrc.gov.uk).

CTG has recognised that more could be done, but noted that HMRC had declined to publish guidance by CTG in support of these changes. The lack of formal tailored guidance from HMRC on requirements has made it more difficult for such changes to be prioritised and there were often long lead times or a need to include Gift Aid messaging in an appropriate way that was not detrimental to the overall fundraising ask. It has been agreed that CTG will work with HMRC to prepare a letter giving a clear steer on the expectations for the Gift Aid education in fundraising materials. In the meantime, CTG is collating examples of best practice in donor education on Gift Aid by email at info@charitytaxgroup.org.uk.

Other topical developments

• VAT and DfID funding: CTG will be hosting a meeting tomorrow (10 December 2019) to discuss a ruling from HMRC (in 2013) on the VAT status of funding from DfID to humanitarian aid charities and whether this reflects current practice within the sector. If you would be interested in participating (in person or by phone), please let us know at info@charitytaxgroup.org.uk.
• Non-Domestic Rates (Scotland) Bill: In a committee meeting, Public Finance Minister, Kate Forbes, has announced that it if the Non-Domestic Rates (Scotland) Bill passes through the Scottish Parliament, it is the Scottish Government’s plan to restrict charity business rates relief from mainstream independent schools’ from 1 September 2020. The Minister claims that by tying the changes to the start of the academic year rather than the start of the financial year, it “should hopefully help schools with their planning for the academic year 2021.”
• Civil Society hustings: Representatives from five political parties answered questions about issues affecting civil society and about their parties’ policies at a civil society hustings event. The participants discussed the National Citizen Service, international aid, uncertainty surrounding Brexit, the Lobbying Act and charity campaigning, and small charities. Improved tax treatment for charities was also referenced. The debate can be viewed here. CTG made a call on social media for all political parties to consider targeted VAT reform, regardless of the outcome of Brexit.
• Tapered annual allowance for pensions: CTG has expressed concerns that while adjusted and threshold income can be reduced by gifts of shares, securities and property to charity and payroll giving donations it does not apply to Gift Aid. HMRC has confirmed that while this may seem anomalous it was a conscious policy decision due to the way the Gift Aid is structured compared to other reliefs. If you have received any queries from donors about this or would like to discuss it further please contact info@charitytaxgroup.org.uk.
• HMRC grant funding 2020 to 2021: HMRC will allocate a guaranteed £1.66 million over the next year (April 2020 to 2021) to the voluntary and community sector (VCS) to support customers who need extra help understanding and complying with their tax obligations and claiming their entitlements, including those who are currently digitally excluded. This may be of interest to some members and the deadline for applications is 11 December 2019. CTG is considering an application for funding in support of promoting best practice in Gift Aid among charities – if you would like to provide a testimonial in support of this application please contact info@charitytaxgroup.org.uk.
• Community Amateur Sports Clubs (CASCs): The list of sports clubs registered with HMRC as a CASC has been updated with over 140 new additions.
• HMRC Employer’s Bulletin: This helpful bulletin includes guidance on a range of issues including advice for employers on reporting PAYE information in real time when payments are made early at Christmas.

ICYMI

Catch up on recent news items and commentaries below:

• Corporate Criminal Offence – guidance for incorporated small charities
• Data Protection and Third Party Fundraising Platforms including Facebook Donate
• Election manifestos published – tax proposals

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.

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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