CTG Newsletter – 14 November 2016

Further consultation on Gift Aid donor benefits

The Government has published a summary of responses and its proposals on the Gift Aid donor benefits consultation, which closed on 12 May 2016. A full analysis of the consultation document can be found here.

On the relevant value test, there was a lack of clear consensus around any single reform proposal. As such, the Government does not believe that it would be right to proceed with implementing any of the reforms proposed at this stage. Instead it has developed a further set of reform proposals aimed at reflecting more specifically the preferences and concerns expressed by respondents.

The Government is proposing three further options: 1) Retaining three thresholds 2) A single threshold 3) Two thresholds. New consultation questions seek feedback on these proposals. The consultation also asks for feedback on the merits of a low-value disregard, to which the Government is open if it is of genuine value to the charities sector, whilst also being affordable, appropriate, and consistent with EU rules on state aid.

The deadline for responses to the consultation is 3 February 2017. If you would be interested in participating in a CTG working group and/or seminar on this topic, please let us know at info@charitytaxgroup.org.uk.

Business Improvement District (BID) levies – charity relief?

Business Improvement Districts (BIDs) are business led partnerships which are created to deliver additional services to local businesses. A levy is charged on all business rate payers in addition to the business rates bill which is used to develop projects which will benefit businesses in the local area (including additional security, improved street furniture, parking etc)

Central Government guidance on who should pay the BID levy states: “The amount and type of relief is dependent on local circumstances but could typically include charity relief”.

CTG has been contacted by a member charity whose local BID was seeking to define charity relief more narrowly than that for mandatory business rates relief. We would welcome feedback from members to info@charitytaxgroup.org.uk on whether they are in a BID and if so whether they are exempt from the levy, or subject to it (and if so at what cost).

HMRC consultation on penalties for participating in VAT fraud

CTG has responded to an HMRC consultation on penalties for participating in VAT fraud. CTG is committed to ensuring that charities are not used as a vehicle for VAT fraud and welcomed the Government’s commitment to tackling this issue. However we questioned whether trustees should be exposed to risk if the executive or other employees undertake fraud or unwittingly allow the charity to be used in fraud, when it would be unreasonable for the trustees to be aware of this.

Clarification from HMRC on Common Reporting Standard guidance

The Association of Charitable Foundations (ACF) has recently published two key clarifications that it received from HMRC on its Common Reporting Standard (CRS) guidance for charities. It confirms that:

While a UK incorporated charity may qualify as a financial institution, it will not have to carry out due diligence or report on grant holders and will only be required to do so for members of the company who have a debt or equity interest.
Unit Trusts are not regarded as being investments under ‘discretionary management’. This means that trusts or foundations that have placed all of their investments in unit trusts will not be caught by CRS. The reason is that in such cases, HMRC regards the charity as essentially taking a share the profits of the unit trust rather than investing into the market directly.

St Andrew’s College, Bradfield VAT case

The Upper Tribunal (UT) has released its decision in the St Andrew’s College, Bradfield (UT/2015/0017) case holding that the sporting services supplied by two subsidiaries of a non-profit making body failed to qualify for VAT exemption as their constitutions did not contain any specific prohibition on the distribution of profits. This judgment upholds the earlier First Tier Tribunal (FTT) decision. This case highlights the importance of considering, early, the desired aims of an organisation, implementing appropriate plans and drafting constitutions etc with the desired outcome in mind, taking advice where necessary.

Small Charitable Donations Bill – amendments tabled in advance of Report Stage

The Small Charitable Donations and Childcare Payments Bill 2016-17 is scheduled to go through Report Stage and have its Third Reading in the House of Commons on 15 November 2016. In advance of Report Stage, three new clauses and two amendments have been tabled by members of the opposition, again relating to reform of the matching rules and the scope of the donations eligible for GASDS.

Consultations tracker

CTG will be considering responding 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.