CTG continues to play an active role in shaping policy development and representing charities’ interests to HMRC and HM Treasury.
The Government announced some key VAT initiatives in April, including bringing forward the implementation of VAT zero rating of e-publications and temporarily zero rating personal protective equipment. It also confirmed that all VAT payments to HMRC due between 20 March 2020 and 30 June 2020 can be deferred until 31 March 2021, to help businesses manage their cash flow.
Similarly, the Government made several tweaks to how Gift Aid operates in the current COVID-19 climate, such as introducing some practical relaxations to the operation of Retail Gift Aid while offices are closed and clarifying how Gift Aid on donations freely given to charities and Community Amateur Sports Clubs (while membership subscriptions have been suspended) will work. CTG also welcomes HMRC’s confirmation that charities will be able to claim Gift Aid on tickets for events cancelled due to COVID-19 (including those with registration fees).
Additionally, the Government continued to update various guidance over the month of April, of which the most noteworthy being as follows:
- Guidance was published on the Retail, Hospitality and Leisure Grant Fund
- Guidance was published on claiming back Statutory Sick Pay that is paid to employees due to COVID-19
- BEIS published a document outlining its intention to assist companies in meeting statutory obligations to hold meetings and to file documentation on the Companies Register
- The Treasury published a Written Statement, outlining delays to a number of consultation deadlines and consultation responses as a result of COVID-19
- The Welsh Government extended the deadline for its consultation on charitable rates relief for Welsh schools and hospitals
- HMRC responded to CTG’s letter on the accounting Requirements for the Creative Industry Tax Reliefs
- MHCLG published data on the number of charity properties receiving mandatory (93,247) & discretionary (27,373) business rate relief, in England, in 2019
- HMRC announced the concession exempting representative occupier posts from the benefit in kind charge on their employer provided living accommodation will be withdrawn from 6 April 2021.
CTG also collated the support available to charities in the devolved administrations (Scotland, Wales, and Northern Ireland) and Bill Lewis, of Bates Wells, commented on the Upper Tribunal’s decision that theatrical production costs do not have a link to taxable catering supplies.
In a month that saw the Budget announced and then lockdown enforced, the CTG team has been working hard to collate relevant announcements, gain clarity on announced support measures, and lobby for support for the charity sector.
CTG created a Coronavirus information hub for charity tax and finance professionals, which collates the numerous Government announcements on the different support schemes available during the coronavirus outbreak. The hub is updated regularly and provides information on various schemes that organisations may be able to access during the pandemic.
The Chancellor published the 2020 Budget which had a disappointing lack of references to charities. That being said, it did contain broader announcements that will benefit charities, such as introducing a VAT zero rate on digital publications and the initial support measures in relation to Covid-19.
The Chairman of the Charity Tax Group, John Hemming, wrote to the Chancellor requesting immediate support for charities through the tax system during the COVID-19 pandemic. The letter presented six practical proposals to simplify charities’ interaction with the tax system and unlock important tax reliefs for charities at a time when cashflow is under serious strain.
CTG approached contacts at HMRC for clarification as to the wording in HMRC guidance for the Creative Industries Tax Reliefs, which referenced that goods or services must be provided from within the European Economic Area. HMRC stated that they were aware that the EEA criteria potentially excluded UK expenditure and, as a result, the relevant legislation was amended last year to ensure that such references would continue to be effective. Specifically, amendments to Part 2 of the Corporation Tax Act 2009 replaced references to “EEA expenditure” with “European expenditure”, which includes the UK.
The implementation of a series of Government reforms and administrative tasks were delayed in response to the coronavirus pandemic. The Government delayed reforms to off-payroll working, delayed the requirement for digital links in relation to Making Tax Digital, and announced a more generic deferral of VAT payments.
Coronavirus aside, CTG has continued to support its members address commonly raised issues by organising and supporting engagement efforts. CTG representatives also met London Economics to review the findings of the VAT research project.
CTG published a letter that was sent to the Chancellor, outlining representations on a range of tax issues, in advance of Budget 2020. In the submission, CTG called on the Government to:
- Commit to a strategic review of the future VAT system with the aim of reducing the irrecoverable VAT charities currently incur
- Confirm that digital advertising by charities is eligible for a VAT zero rate within the current law
- Extend VAT zero rating to electronic publications produced and purchased by charities
- Prioritise resolution of discussions between HMRC and Facebook approving Gift Aid claims on donations received by Facebook (and other fundraising platforms)
- Increase the non-primary purpose trading limit (miscellaneous income) from £80k
- Confirm that the forthcoming review of business rates in England will protect existing charitable reliefs
- Consider tax credits to stimulate the funding of bio-medical research by charities, similar to those provided to investor owned research companies
- Commit to no further increases in Insurance Premium Tax (IPT) for charities and consider targeted relief where the insurance is required for activities or premises directly related to a charity’s objects
- Allow Apprenticeship Levy funds to be used towards the costs of training volunteers.
Following a Government reshuffle, a new Chancellor and Exchequer Secretary to the Treasury were appointed. CTG participated in a meeting of the HMRC Charity Tax Forum, liaising with officials on a range of topical issues including 5MLD/Trust Registration Service and charity tax returns.
The Government published updated guidance on the Employment Allowance – from April 2020 access to the Employment Allowance for a tax year will be restricted to employers with secondary Class 1 NIC liabilities below £100,000 in the previous tax year. The income will be operated as de minimis State Aid.
Following the News Corp case, HMRC issued a briefing confirming that the VAT treatment of digital newspapers and related publications had not changed.
The Government announced that off-payroll working rules will now apply only to payments made for services provided on or after 6 April 2020. The Government also published its response to its review of changes to the off-payroll working rules.
CTG’s Gift Aid working group met and discussed topical issues including Facebook Donate, data protection, donor education and retail Gift Aid. The Future of Gift Aid working group also met representatives from HMRC and the payments and intermediaries sectors to review a “proof of concept” on automating Gift Aid processes and harnessing the power of digital technology, Open Banking and HMRC Personal Tax Accounts.
Charities welcomed confirmation from HMRC that, following representations by CTG and others, charitable trusts would not be required to register with the Trust Registration Service as they were a low risk of money laundering and terrorist financing. This has saved significant work for many charities.
The Government published a review into the implementation of new off-payroll working rules from April 2020. CTG was invited to participate in a stakeholder roundtable meeting at HM Treasury and highlighted practical issues facing charities, calling for a soft-landing period in terms of compliance. HMRC also published draft legislation on implementing these rules.
CTG worked closely with charities and agencies to consider a potential challenge to HMRC’s view on the the VAT treatment of social media advertising.
Members of CTG’s Future of Gift Aid working group discussed a “proof of concept” proposal with HMRC’s innovation team – the proposal is to future proof the payments architecture and HMRC systems to allow for greater automation of Gift Aid in future.
At the end of the month, the Welsh Government published a consultation on the appropriateness of charitable rates relief for private schools and hospitals.
A detailed re-cap of charity tax news, consultations and commentaries that took place in January can be found here, including updates on the Employment Allowance, Retail Discount and VAT and e-publications.