CTG Newsletter – 11 May 2017
Policy issues update
Due to the pre-election purdah period, a number of policy issues have experienced delays or postponements. While many of these areas are technical and non-party political, it remains to be seen how soon after the election these policies will be progressed. Work on other issues is ongoing or has seen the implementation of new policies confirmed.
A very short update on some of the issues we are working on is outlined below – if you would like to discuss any of these issues in greater detail, please contact us at info@charitytaxgroup.org.uk
- Making Tax Digital: Provisions introducing the new quarterly digital reporting requirements were dropped from the Finance Bill, but this very clearly a postponement for practical reasons, rather than a cancellation. CTG has welcomed the charity exemption, but called for this to be extended to charity trading subsidiaries too and, if this is not possible the introduction of a de minimis thresholds and provision of free training/software. CTG is liaising with officials about including a number of charity trading subsidiaries in the appropriate stage of the pilot process.
- Gift Aid Donor Benefits: CTG responded to the latest consultation in February 2017 supporting a two threshold spliced arrangement with 25% benefit value applicable to the first £100, and 5% applicable to any value above £100 (to the current benefit value overall cap), with no disregard for low value items, but preserving current disregards, and clarifying the literature disregard. Government is still to respond to the consultation and has not yet set up the promised technical working group to discuss in detail issues relating to the “in consequence” rule, valuation of benefits and operation of the split payments mechanism.
- Review of employer-provided living accommodation tax exemption: CTG responded to a Government Call for Evidence last year on the current tax treatment of employer provided living accommodation. This exercise was designed to inform decisions about whether and how to simplify this area following OTS reviews on employee benefits and expenses. The current exemptions are very important for a number of charities and CTG has stressed their ongoing importance and value. A full consultation was expected to be published alongside Budget 2017, but this has delayed and no firm date for its publication has been confirmed.
- HMRC research on motivations for Gift Aid and working group on the cumulative burden of taxation on charities: The Financial Secretary to the Treasury confirmed that HMRC would be publishing new research and launching a new working group at the CTG Tax Conference. It remains to be seen when these issues will be progressed, but we should learn more at the next Charity Tax Forum meeting, which will take place in mid-June.
- Museums and Galleries Tax Relief: The relief was due to be legislated in the Finance Bill but was postponed due to the election. The Financial Secretary has said there has been no policy change and the Government would legislate for the provisions at the earliest opportunity in the next Parliament.
- Updated HMRC VAT guidance notes on grants/contracts and sponsorship: CTG continues to work with HMRC officials on these important guidance notes and hopes that significant progress will be made in the autumn, following the election.
- Office of Tax Simplification (OTS) VAT Review: CTG recently met the Review team and it is clear that this consultation exercise will play an important role in shaping VAT rules post-Brexit. CTG is preparing its response to the consultation, having highlighted to officials the difficulties charities faces due to the structural deficiencies of the VAT system.
- Apprenticeship Levy: As the Apprenticeship Levy beds in we are starting to identify potential practical issues and questions facing charities and would welcome your feedback on your experiences to date.
- Insurance Premium Tax (IPT): IPT is due to increase to 12% in June 2016 resulting in increased costs for charities. Government has rejected calls for any form of charity exemption, highlighting the importance of the tax as a revenue raiser. Charities are encouraged to complete CTG’s IPT survey, so that we can highlight the additional financial burden faced by the sector.
- Community Infrastructure Levy (CIL) Review: A review of CIL (to which charities benefit from exemption) has recommended its replacement with a new Tariff with “no (or very few) exemptions”. CTG will be making representations to DCLG Ministers and officials on the importance of protecting charities, before an official response is published at the time of the Autumn Budget.
- Gift Aid practical issues working group: The working group continues to discuss topical Gift Aid issues, including the operation of online fundraising pages and to share best practice on the administration of Gift Aid records and experiences with HMRC. For further information on joining the working group or submitting a query see here.
CTG regional meetings
CTG is hosting a series of meetings for charities and advisers exploring recent policy developments and providing practical tax updates. These afternoon events are free and will be preceded by a sandwich lunch. Register here for the next meeting, on 19 June, in Birmingham, in association with BDO. Presentation slides from last week’s meeting in Leeds (hosted by Wrigley Solicitors) can be accessed here.
CTG responds to GDPR consultation
CTG has responded to a recent DCMS consultation on the application of the General Data Protection Regulation (GDPR), highlighting the need to recognise the practical implications for charities at an operational level, where there are conflicting obligations to contact donors for administrative reasons. The response also calls for further discussions between HMRC, the ICO and charities to establish clear guidance on what is and is not permitted in respect of donor contact and Gift Aid. While it may not have many direct tax implications you should ensure that relevant colleagues in your charity are ready for the new rules, which are effective from May 2018. Useful guidance has already been published by the Institute of Fundraising here and ICO here.
Taxation of employee expenses
HM Treasury has published a call for evidence in order better to understand the use of the income tax relief for employees’ business expenses, including those that are not reimbursed by their employer. Many employees incur expenses as part of doing their job. While some employees will pay for the expenses themselves, some employers reimburse their employees for costs they incur, while others pay for business expenses directly. Given the significance of expenses to employers, employees and the tax system, the Government wants to ensure that the rules are effective, and to understand more about why the claims for non-reimbursed expenses have increased. The treatment of self-employed expenses is out of scope of this call for evidence.Responses are due by 10 July 2017. Further information can be found here.
CJEU judgment in Luxembourg case on VAT cost-sharing exemption
The CJEU has given its judgment in the Luxembourg case (C-274/15) relating to the implementation of the cost-sharing exemption . The court found that Luxembourg’s legislation on independent groups of persons (IGPs) did not comply with the EU VAT Directive, resulting in services being incorrectly treated as exempt. In the CJEU’s opinion, only services rendered by an IGP that are directly necessary for the exercise of the exempt activities of its members may fall outside the scope of VAT. In the light of the IGP’s independence from its members, the latter may not reduce the amount of VAT which they are liable to pay in respect of goods or services provided to the IGP. This decision was in line with the Opinion that Advocate General Julianne Kokott delivered in October last year
Consultations and case law tracker
CTG will be preparing responses to a number of important consultations over the next few months. Our consultation responses rely on input from members and we would encourage you to send us your thoughts, and where relevant submit your own consultation response. The deadlines for forthcoming consultations are outlined below. Please send your feedback via the relevant consultation page on the CTG website or to info@charitytaxgroup.org.uk.
CTG’s VAT case law tracker can be accessed here.
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