The festive season has got off to a great start with good news for charities in the Autumn Statement. The National Press coverage is concentrating on stamp duty reforms that will affect you if you are buying a home, amongst other announcements. Hidden behind those headlines are a number of positive measures for charities; perhaps the most direct measures are the extension of VAT rebate schemes for hospices and search and rescue charities.
These VAT news stories for charities are:
Hospice charities move to a level VAT playing field
Until now, hospice charities have been disadvantaged when competing for contracts with NHS providers as they have suffered VAT on many non-business supplies, which NHS providers of course do not. This gives a significant disincentive to contracting out.
Following the Fair Playing Field Review, the government says that they will refund the VAT that hospice charities incur. This should give VAT savings of up to £4million per year.
VAT rebates for air ambulances and search and rescue charities
Emergency response charities have campaigned that they were in a special situation and needed VAT reliefs in order to operate on the same tax footing as the other emergency services, such as the police, fire officers and coastguard.
The anomaly has been removed as, from April 2015, UK search and rescue and air ambulance charities will be eligible to claim refunds on VAT they have paid on purchases of goods and services for their non-business activities. Savings of up to £5million per year are estimated.
To summarise the other welcome measures for charities, including extension to Social Investment Tax Relief, and progress in modernising gift aid:
Social Investment Tax Relief (“SITR”): enlarging the scheme
The government will increase the annual investment limit for SITR to £5 million per annum, up to a total of £15 million per organisation, from April 2015 and will also consult further on a new relief for indirect investment in social enterprises.
SITR was introduced in Budget 2014 and was welcomed as a relief that encouraged funding for the sector from a genuinely new source of loan/investment capital. However it has not proved straightforward for charities to comply with the rules on the scheme, and larger charities are currently hampered by an investment cap of €344,000 per organisation.
Donor benefits and Gift Aid entrance and membership fees
The government will continue and extend the review of donor benefits launched at Budget 2014 to include consideration of the rules for claiming Gift Aid on membership and entrance fees. An update will be provided at Budget 2015. The Charity Tax Group, of which Larking Gowen is a member, has led the sector representation on this issue. The government is considering suggestions that include reviewing the value thresholds for benefits and the way that membership schemes are assessed.
The government will also work with the sector on updating the guidance and making it easier to understand, which ought not to be a bad thing.
Simplifying Gift Aid on digital donations
This aims to make Gift Aid operate in an efficient way on text giving and other digital giving platforms. The idea is that a single Gift Aid declaration would suffice for all money collected through a single intermediary.
The government has repeated the Budget 2014 announcement that it will publish draft legislation to allow regulations to be made which give intermediaries a greater role in administering Gift Aid.
Business rates reform
It is often not appreciated that business rates relief is more valuable to charities nationally than any other tax relief, including Gift Aid. This is of course the point picked up by Shadow Education Secretary Tristram Hunt, in his recent broadside across the bow of the independent school sector. Therefore it is of considerable interest to charities that the government will conduct a review of the future structure of business rates, due to report by Budget 2016.
Companies with similar turnovers can pay wildly different sums for business rates because their properties have varying “rateable values” depending on the size and location of their premises – these discrepancies are a target of the review. Treasury officials have indicated that the review is not aimed at the vast majority of charities, and existing charity reliefs are not being questioned. As always, the devil will be in the detail.
Church roof repair fund
The government will provide £15 million for a new Listed Places of Worship: Roof Repair Fund, to support the maintenance of church roofs – but only for 2015.
An orchestra tax relief
No specifics yet, but expect a formal consultation in early 2015 about introducing a new tax relief for orchestras from April 2016.
And also of interest to charities and donors …
- the personal allowance will be increased by a further £100 in 2015-16 to £10,600
- the higher rate threshold will increase by inflation (1.2 percent) in 2015-16: the full gains of the increase in the personal allowance will thus be passed on to higher rate taxpayers.
To discuss the needs of your Not for Profit organisation please contact us to speak to one of our specialist advisors.