The Finance (No. 2) Bill 2016-17 and the associated explanatory notes have now been published. Provisions relevant to charities are outlined below, reflecting previous announcements in the 2016 Autumn Statement and the recent Spring Budget.
Off-payroll workers in the public sector
Clause 7 and Schedule 1 move the responsibility for ensuring that the correct income tax and NICs are paid from an individual worker’s intermediary (Personal Service Company) to any public sector, agency or third party paying that intermediary. This reform will not affect those operating in the private sector, but the definition of “public sector” matches that for the Freedom of information Act and catches more charities than might be expected. For more detail, read Susan Ball’s commentary on the legislative changes here.
Salary Sacrifice and Benefits in Kind
Clause 8 and Schedule 2 introduce legislation which will limit the income tax and employer NICs advantages where benefits in kind are provided through salary sacrifice arrangements. It does so by imposing a notional cost on taxable benefits based on the value of the amount of salary given up, if this is greater than the charge that would otherwise be due under the legislation.
Extension of Social Investment Tax Relief (SITR)
Clause 27 and Schedule 8 make changes to the SITR scheme, to increase the amount of money newer social enterprises may raise from individual investors. Amendments also include provisions to better target the scheme on higher risk activities and deter abuse. Energy generation activities are excluded, as announced at Autumn Statement 2015.
Museum and gallery exhibitions
Clause 32 and Schedule 11 introduce a relief from corporation tax for qualifying museum and gallery exhibitions at a rate of 25% of losses surrendered for touring exhibitions and 20% for other exhibitions. The relief is capped at a maximum of £100,000 payable credit per exhibition for touring exhibitions and a maximum payable tax credit of £80,000 for other exhibitions. CTG took part in discussions with HMRC assessing the scope of this relief.
VAT zero-rating of adapted motor vehicles
Clause 57 and Schedule 19 introduce legislation that will tighten up the VAT relief on the supply of motor vehicles that are substantially and permanently adapted or designed for disabled wheelchair users. They set out the eligibility criteria for the vehicle to be zero-rated, as well as setting a “three year rule”, whereby only one supply of an eligible vehicle to a disabled individual will qualify in every three years.
Insurance Premium Tax (IPT)
Clause 58 increases the standard rate of insurance premium tax (IPT) from 10% to 12% with effect from 1 June 2017. The Government continues to resist calls to introduce a special charitable rate of IPT.
Penalties for enablers of defeated tax avoidance
Clause 125 and Schedule 27 introduce a new penalty for any person who designs, markets or otherwise facilitates tax avoidance arrangements that are later defeated. The penalty charged will be equal to the amount of the consideration received or receivable by an enabler for its role in enabling the tax avoidance arrangements. The clause also introduces new powers for HMRC to publish details of those who have been required to pay any assessed enabler penalty.
Penalty for transactions connected with VAT fraud
Clause 129 will give HMRC the power to apply a penalty where a person has entered into a transaction connected with fraudulent evasion of VAT and that person knew or should have known of that connection. The penalty will be 30% of the potential lost VAT.