Following the Budget on 18 March, we explore the significant changes arising that impact on charities.
VAT relief for charities
Following the Autumn Statement announcement, we are delighted that the Budget has confirmed a VAT refund scheme for Hospices, Search and Rescue organisations, Air Ambulances and now extended to Bike Blood charities will come in on 1 April 2015.
This change enables certain charities to claim refunds of VAT on supplies made to them on or after 1 April 2015 for the purpose of their non-business activities. It provides financial support for palliative care charities, and gives the other qualifying charities broadly the same level of VAT recovery as is presently afforded to the publically funded emergency services. We are pleased that Peter Ladanyi, independent VAT specialist, was on of the team working with Hospice UK on government policy to achieve the above.
This is really fantastic news and extremely welcome move for the charity sector It is an important first step in the Government recognising the burden of VAT bourne by the charity sector and giving part of the sector some relief. We are really encouraged by the government recognising that there is a VAT burden on charities, albeit for a small sub sector, and see that there is a huge opportunity for the rest of the sector as a result. We would encourage more of the sector to group together to present well-formed reasoning for HMRC as to why they should also be allowed VAT refunds and to expand such VAT relief to more charities.
Direct mail VAT threat
From 2012 charities have had to pay VAT at the standard rate on postage. As many charities are not able to recover the VAT, the cost to them was potentially enormous.
Consequently an arrangement was devised whereby the postage and the printed mailing were sourced from a single supplier. The charity was thus buying a single supply of delivered goods and as the leaflets were zero rated printed matter, the entire supply including the postage was zero rated.
Detailed guidance will be issued by HMRC in the New Year confirming HMRC’s policy, which changes this position, and this will be enforced from 1 April 2015.
It is anticipated that the above composite position of zero rating will be allowed to continue until 31 March 2015. From that date, printing of direct mail packs will be zero-rated to include the preparation, design and creative services of such packs. Services of advisory, strategic and planning will remain standard-rated and cannot be included in the above. Distribution services will be standard rated and exempt if provided by Royal Mail as an agency disbursement for the charity under downstream access arrangements.
HMRC has agreed retrospective action will not be taken except in cases where the composite zero-rated supply has been in HMRC’s view structured to include strategic, planning and advisory services (which should then be standard rated).
Subsidised fundraising training
The Office for Civil Society will take forward the procurement of a partner to deliver subsidised fundraising training to small charities in 2015-16.
The Government will provide a grant to support charities providing rapid response vehicles for medical purposes. The Government has committed £75 million of LIBOR fines over the next 5 years to support military charities and other good causes.
The Government has also announced a further £40M to be added to the Church Roof Repair Fund of £15M announced in the Autumn Statement 2014 to support vital roof repairs undertaken between 2015 and 2017.
Gift Aid small donations scheme (GASDS)
The maximum annual donation amount that can be claimed through the Gift Aid small donations scheme will increase from £5,000 to £8,000. This will take effect from April 2016, allowing charities and Community Amateur Sports Clubs to claim Gift Aid top-up payments of up to £2,000 a year.
As announced in the Autumn Statement 2014, the government will legislate to allow non charity intermediaries to take a greater role in operating Gift Aid in order to reduce the number of instances were a new Gift Aid Declaration is given (Finance Bill 21015) and to allow intermediaries to take a greater role in the gift aid process, including making gift aid claims.
Charity authorised investment funds (CAIFS)
The government is working with the Financial Conduct Authority (FCA), the Charity Investors’ Group and the Charity Commission to introduce a new CAIF structure.This will bring new investment funds established for charitable purposes under FCA regulation, ensuring that they receive the same regulatory oversight and protections as funds for retail investors. These CAIFs will register with the Charity Commission and will replicate the benefits of Common Interest Funds (CIFs) with new benefits and greater protection under FCA regulation. In particular, management fees on CAIFs will be VAT exempt. Existing CIFs will be allowed to convert to CAIFs, however it s not clear as yet when these will be available to be launched.
Corporation Tax: orchestra tax relief
Following the theatre tax relief, the Government has announced that it will extend this to provide tax relief to orchestras at a rate of 25% on qualifying expenditure from 1 April 2016. The details are yet to be announced of how this will operate. It is anticipated that charities will be able to benefit from this in the same way as they can do in respect of the theatre tax relief on production costs. Please contact us for more details of how to benefit from these reliefs.
Head of Charities and Not for Profit
To find out more about the services available from Price Bailey, and to discuss your not-for-profit organisation’s needs with one of our experts, please get in touch with our Not for profit team.