CTG’s work in 2019: Review of the year

CTG continues to play an active role in shaping policy development and representing charities’ interests to HMRC and HM Treasury.

  • December: The general election resulted in a significant parliamentary majority for the Conservative Party, increasing the likelihood of his Brexit deal navigating through parliament(by the end of January 2020). The Queen’s Speech was confirmed as 19 December 2019, with a Budget expected in February/March 2020. During the month, CTG co-ordinated meetings with charities on the VAT treatment of DfID funding and digital advertising. CTG also published guidance for small charities on compliance with the Corporate Criminal Offence legislation. An expert commentary was also published on data protection considerations when using third party fundraising platforms such as Facebook Donate. CTG also published a review of charity tax developments and CTG successes over the previous decade.
  • November: CTG launched its important VAT research survey, which 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 political parties published their election manifestos and CTG prepared a detailed analysis of the tax and finance proposals. Discussions continued with HMRC, agencies and charities about the VAT treatment of digital advertising. CTG’s Gift Aid working group met representatives from aimm to discuss audit processes for Gift Aid on SMS donations. HMRC officials also attended to discuss ways that charities can improve donor understanding about Gift Aid in fundraising materials. HMRC also confirmed to CTG that the turnover test for IR35 compliance would not include grants or other voluntary income. During November, HMRC also published guidance on taxation of crypto-assets, while the OECD undertook consultations on Pillar One and Pillar Two of its anti-tax avoidance proposals.
  • October: Following representations by CTG, HMRC published an updated sign-up timeline for organisations (including charities) that had their Making Tax Digital mandated start date deferred until October 2019. CTG also published a Making Tax Digital “mythbuster for charities. CTG received a disappointing response from HMRC in respect of its policy on VAT and digital advertising, but discussions with officials continue. On Gift Aid Awareness Day, Richard Bray (CTG Vice Chairman) participated in a podcast with the Charity Finance Group on the future of Gift Aid. CTG also met HMRC to discuss the future of Gift Aid. CTG also instigated discussions with HMRC and Facebook about the Gift Aid eligibility donations made on Facebook. The Non-Domestic Rates (Scotland) Bill which proposes reform of non-domestic rates in Scotland continued on its journey through the Scottish Parliament. At the end of the month, the Treasury Committee proposed a review of all business rates relief to ensure they remain necessary. An election was announced for 12 December 2019, cancelling the planned November Budget and delaying the Finance Bill.
  • September: CTG’s Gift Aid practical issues working group met and engaged with officials from the Fundraising Regulator on references to Gift Aid in the Fundraising Code. The working group also discussed issues relating to Gift Aid on donations received via Facebook (with progress expected soon) and the forthcoming Gift Aid Awareness Day (on 3 October 2019). A consultation on business rates in Northern Ireland was published and CTG will be working closely with the Charity Retail Association in developing a response. CTG also held a meeting with officials in the HMRC deductions team, before submitting a detailed response to the call for evidence on simplification of VAT partial exemption and the Capital Goods Scheme. CTG also participated in a roundtable meeting with sector bodies reviewing next steps for the Charity Tax Commission proposals.
  • July: CTG welcomed the publication of the Charity Tax Commission report, but did suggest that some of the proposals could have been more far-reaching. CTG will discussing the proposals with other sector bodies in September and with HMRC in due course. Also in July, HMRC published a response to the off-payroll working consultation confirming that the new rules will be implemented in April 2020 as planned. CTG has followed-up representations to HMRC about the definition of turnover and whether it should include donation and grant income or not, as this is not directly addressed in the response. We understand that this income will be excluded, but we are waiting for HMRC to confirm this in writing. . CTG also reviewed the potential implications of the recent University of Cambridge VAT case on investment management fees, with the CTG Observer Members, with a view to future discussions with HMRC officials, in September, to determine their next steps. During July, CTG also briefed the Department for Exiting the European Union (DEXEU) on CTG’s forthcoming VAT research project, with the survey due to be published in September 2019.
  • June: Responding to queries from members, CTG shared a helpful refresher for charities on the HMRC rules they need to comply with when making grants overseas. CTG also notified members that HMRC had issue tax return requests to 3,000 charities. CTG responded to a call for evidence on the Scottish Non-Domestic Rates Bill highlighting concerns that removal of rates relief for mainstream independent schools in Scotland risks the creation of a two-tier status for charities with tax reliefs applicable only to the most “deserving charities”. The Labour Party published its Civil Society Strategy, which led in turn to engagement with the Shadow Minister for Civil Society’s team, which has requested briefing on tax policy priorities for charities. CTG co-ordinated a meeting with HMRC to discuss ways that the HMRC guidance on grants and sponsorship could be improved, with charity VAT experts. HMRC officials have confirmed that they would be willing to review changes proposed by CTG. In June and July, CTG participated in three meetings with HMRC officials to discuss Making Tax Digital (MTD). This has included discussions on charities’ readiness for the digital link requirements and measures to support fundraising branches and volunteers to comply with MTD.
  • May: Following discussions between CTG and HMRC a new section in the Making Tax Digital VAT guidance was introduced on charity fundraising events, relaxing the digital record keeping requirements. CTG continued to expand its range of MTD resources, including a case study on the steps Cancer Research UK (CRUK) is taking to prepare. CTG’s Future of Gift Aid working group also met for the first time to discuss a range of issues including potential for future automation of Gift Aid, ways to capture digital gifts in the future and whether Gift Aid can continue in its current form and remain fit for purpose, or whether more radical changes are needed. This working group will be developing these initial ideas in a series of meetings in the autumn. CTG also challenged charities to consider whether they could be claiming more Gift Aid and were being too cautious in their approach (particularly in respect of the quality of data received from donors). Discussions between CTG and HMRC yielded helpful feedback on when charities could claim, as well as details of Common Errors on Gift Aid claims and frequent questions to the Charities Helpline.
  • April: Over 150 charity representatives and advisers attended CTG’s Annual Tax Conference. The Conference included a keynote speech from the Exchequer Secretary to the Treasury and updates from expert speakers on issues as varied as the future of Gift Aid, business rates, off-payroll working, VAT cases and Making Tax Digital. CTG also outlined plans for an important new VAT research project, as part its Annual Review 2018-19, which highlights the organisation’s work “Influencing the future of charity taxation”. CTG made sure that charities were aware of a range of tax changes and deadlines in April 2019. This included changes to the Gift Aid Small Donations Scheme (new £30 limit for donations), Gift Aid Donor Benefits rules (new relevant value test), operation of Retail Gift Aid (new £20 de minimis limit) and the small trading exemption (with the threshold increased to £85,000). All of these changes had been proposed by CTG and presented to the Exchequer Secretary to the Treasury, at the 2018 Tax Conference. April saw the start date for Making Tax Digital VAT reporting requirements for all charities not deferred and CTG continued to work with HMRC officials on changes to the VAT guidance to support charities. CTG also attended a roundtable meeting with HM Treasury following the publication of a consultation on the implementation of the Fifth Money Laundering Directive (5MLD), which has important implications for some charities.
  • March: Following discussions with HMRC on the new £20 de minimis limit for annual letters to donors (for charities operating methods A or B of the Retail Gift Aid scheme), CTG published a number of worked examples and FAQs for members. March also saw the Chancellor present the Spring Statement confirming the Government intention to launch a full three-year Spending Review (although this is to be replaced by a fast tracked one-year Spending Review – see below). The Statement included welcome confirmation of a light touch approach to penalties on MTD in the first year and announcement of future Government plans including: consultation on regulations to reform the Employment Allowance (since published an open for consultation – see below); a planned call for evidence on simplifying VAT Partial Exemption and the Capital Goods Scheme (also now published) and a planned review of the Social Investment Tax Relief to date (which opened in May and has now closed). Following a consultation process with stakeholders including CTG’s Gift Aid working group, JustGiving announced changes to its funding model.
  • February: Following confirmation that the UK now has the power to equalise the VAT treatment of e-publications with printed publications (zero rated), CTG co-ordinated a meeting with HM Treasury and HMRC to discuss how charities currently use e-publications and how they might do so in the future. Although the Government has declined to make changes so far, this was a constructive meeting and the implications for charities will certainly be considered by officials, if and when the UK changes the VAT rate and definitions of e-publications are decided. Continuing discussions that commenced in 2018, CTG representatives met HMRC officials for continued discussions on the VAT treatment of online advertising. Following representations from CTG, HMRC is seeking further internal legal opinion to inform their thinking on the correct VAT treatment and we hope to receive a full response in the autumn. February also saw the Finance Bill 2018-19 receive Royal Assent – the legislation implemented a number of provisions that were announced in recent Budgets including changes to the Gift Aid donor benefit thresholds for the “relevant value test” and an increase in the small trading exemption thresholds – both measures proposed by CTG. Other interesting developments in February included confirmation that the Government’s plans to maintain the VAT registration threshold at its current level of £85,000 until March 2022. In addition, the Charity SORP making body released guidance on the accounting for corporate gift aid payments made by a trading company to its charitable parent. Lastly, the Scottish Government published the Barclay Implementation Advisory Group’s Final Report on business rates, confirming that mainstream independent schools will no longer be eligible to apply for mandatory charitable rate relief.
  • January: At the start of the year, charities were encouraged by HMRC to submit full forename details on Gift Aid claims where possible. A proposal to make this mandatory from April 2019 had been averted following representations to HMRC officials by CTG. Also that month HMRC published an updated version of VAT Notice 700/22: Making Tax Digital for VAT. This included confirmation that HMRC had accepted calls from CTG for the soft landing period to be extended to 12 months after the mandated start date, givin charities additional time to prepare. At this time charities were also being notified if their Making Tax Digital start date had been deferred until October 2019. Importantly, HMRC also published an updated Sponsorship VAT Notice (701/41): this followed consultation with CTG’s VAT Expert Group and a number of amendments had been made to improve and clarify the guidance. CTG is continuing to press HMRC for improved guidance relating to use of a charity’s name and charity of the year arrangements, with further discussions expected in the autumn.