CTG Newsletter – 15 September 2017

Budget representations

Members are reminded that the Chancellor has confirmed Autumn Budget will be published on Wednesday 22 November 2017.

CTG is in the process of finalising its pre-Budget submission, the deadline for which is 22 September 2017. We are reliant on feedback from charities and Observer Members so please let us know if you have any relevant proposals or concerns to flag to the Treasury by e-mailing info@charitytaxgroup.org.uk.

Making Tax Digital: VAT – new consultation

On 13 July 2017, the Financial Secretary to the Treasury announced that Making Tax Digital for VAT will come into effect from April 2019 (for businesses with a turnover above the VAT threshold).

The Government has committed that it will not widen the scope of Making Tax Digital for Business beyond VAT before the system has been shown to work well, and not before April 2020 at the earliest.

Provisions in Finance Bill (No. 2) 2017 will give HMRC the powers to introduce regulations, which will set out the detailed requirements that businesses will have to meet.

HMRC has now published an overview of the proposed primary and secondary legislation relating to Making Tax Digital and VAT. The deadline for all responses and comments is 10 November 2017. Full details about the consultation can be found here.

CTG’s summary of the implications of Making Tax Digital for charities and trading subsidiaries is available here.

CTG is arranging a meeting with senior HMRC officials working on this project to discuss the implication of Making Tax Digital and VAT for charities and will keep members posted on the outcomes of these discussions.

Commentary on the Iberdrola VAT case

Dermot Rafferty, Senior Manager at EY, has updated his commentary on Iberdrola VAT case to reflect the full judgment of the CJEU, which took a different view to the AG’s Opinion, finding a direct and immediate link between the services supplied and Iberdrola’s taxable supplies. The CJEU also noted that it is for the referring court to determine whether the renovation services went beyond that which was necessary in order to allow the connection of the village.

Unfortunately, the court declined the opportunity to clarify the Sveda decision, as suggested by the AG. However, the judgment does seem to open up the opportunity for further challenge regarding whether the level of services would be considered “necessary”. The full commentary can be read here.

Barclay Review of business rates – response from the Scottish Government

Members will recall that the Barclay Review of non-domestic rates in Scotland recently published its report, making a series recommendations to the Scottish Government on changes that should be made to the business rates system, including one to remove the ability of independent schools and Arm’s Length External Organisations (ALEOs), as well as university buildings let out for commercial use outside term-time, to claim charitable rates relief.

The Scottish Government has since responded accepting most of the recommendations but noting that the proposals relating to charity relief “merit further thought and engagement”. Finance Secretary, Derek Mackay, stated that he will aim to fully understand the impact of each of these individually, as well as any wider implications and possible unintended consequences, before outlining his position in an implementation plan due to be published later this year.

Round up of topical issues

• VAT and accident rescue charities: A recent Parliamentary question on  has been answered although it unfortunately provides no useful information on the financial impact of irrecoverable VAT for these charities.
• Review of Charity Law: The Law Commission has published the final report of its project on technical issues in charity law, which makes various recommendations aimed at removing unnecessary bureaucracy from charities whilst ensuring proper protections for the public. Recommendations include:
  • giving charities more flexibility to obtain tailored advice when they sell land, and removing unnecessary administrative burdens
  • changes to the law to help charities amend their governing documents more easily with Charity Commission oversight where appropriate
  • increased flexibility to use their permanent endowment, with checks in place to ensure its protection in the long term
  • removing legal barriers to charities merging, when a merger is in their best interests
  • giving trustees advance assurance that litigation costs in the Charity Tribunal can be paid from the charity’s funds
  • bringing in a single set of criteria to decide changes to a charity’s purposes
  • increased powers for the Charity Commission to prevent charities using misleading names and to give them the ability to confirm that trustees were properly appointed
• Tax relief to private hospital charities: In a parliamentary question Justin Madder MP has asked the Chancellor for information on how many private hospitals are registered as charities; and if he will make an estimate of the savings in tax payable to those hospitals as a result of being that status. The answer is due on 9 October 2017.
• NICs and voluntary work: In response to a parliamentary question, the Government has confirmed that there are no current plans to introduce a Class 3 National Insurance credit for volunteers. However, they have confirmed that on the recently published Call For Evidence on the Full-Time Social Action Review will develop recommendations on how to support full time volunteering.
• New £10 note: The Bank of England provides a range of information to help cash users identify genuine banknotes. These materials have been updated to include details of the new £10 note issued on 14 September 2017. Old £10 notes will lose their status as legal tender in Spring 2018.
• Gift Aid donor benefits: HMRC has confirmed that it will launch its Gift Aid donor benefits working group, through the Charity Tax Forum, in October 2017. If you would be interested in contirbuting to CTG’s work on this issue going forward please let us know at info@charitytaxgroup.org.uk 
• HMRC Executive Chair: HMRC’s Executive Chair and First Permanent Secretary, Edward Troup, has announced his plan to retire at the end of 2017.
• Converting to a CIO: Secondary Legislation to enable charitable companies and Community Interest Companies to convert into CIOs has been laid in Parliament. Subject to Parliamentary approval, phased implementation of CIO conversions could begin from January 2018.
• Data Protection Bill: The Data Protection Bill was introduced to the House of Lords on 13 September 2017. The Bill will:
  • Make data protection laws fit for the digital age in which an ever increasing amount of data is being processed.
  • Empower people to take control of their data.
  • Support UK businesses and organisations through the change.
  • Ensure that the UK is prepared for the future after the exit from the EU.

CTG Newsletter Archive

Members can catch up on CTG’s recent newsletters using the links below:

• CTG Newsletter – 12 September 2017
• CTG Newsletter – 6 September 2017
• CTG Newsletter – 29 August 2017
• CTG Newsletter – 22 August 2017
• CTG Newsletter – 17 August 2017

CTG Commentaries

Read our expert commentary pieces and leave your comments and queries:

• Iberdrola VAT case – Implications for Sveda? (Dermot Rafferty) *UPDATED*
• Is a CASC a Charity (for Tax Purposes)? (Graham Elliott)
• Charity VAT Recovery – The Road Not Taken (Graham Elliott)
• VAT recovery for holding companies – MVM case and HMRC guidance (Dermot Rafferty)
• Professional negligence and failed tax avoidance schemes (Sonia Ferreira)
• Definition of a ‘sport’ for VAT purposes – new AG opinion (Graham Elliott)
• Business rates valuations for museums (Colin Hunter)
• First experience of submitting a Common Reporting Standard (CRS) return (CTG)
• Construction of Relevant Charitable Purpose (RCP) buildings – position of sub-contractors (Les Howard)
• Supplies to local authorities – Healthwatch Hampshire VAT case (Graham Elliott)
• Brockenhurst College VAT case – implications for charities (Graham Elliott)
• Filing charity trading subsidiary tax returns and charity accounts (Justin Bevan)
• Adecco appeal on the VAT treatment of temporary workers dismissed (Graham Elliott)
• AG Opinions on the VAT cost-sharing exemption – implications for charities (Graham Elliott)
• Have you paid enough tax to cover your Gift Aid donations? (Kevin Russell)
• Off-payroll working: Major changes from April 2017 (Susan Ball)
• Update on “Economic Activity” and the fate of the Lord Fisher test (Graham Elliott)
• Durham Cathedral VAT case and Sveda – implications for charities (Graham Elliott)
• Hire fees for stalls at fairs – implications of the Kati Zombory-Moldovan case (Graham Elliott)
• Common Reporting Standard – Top 10 tips for charities (Alana Petraske)
• Charity Authorised Investment Fund (CAIF) launched (Grania Baird)
• Longridge on the Thames VAT case – implications for charities (Graham Elliott)
• Implications of Brexit for charity tax (John Hemming)
• Implications of the Hallé case for the philanthropic exemption (Graham Elliott)
• Helping you find your way – the new Charity Tax Group website (John Hemming)

Please contact us at info@charitytaxgroup.org.uk if you would be interested in contributing a commentary piece.

Website, newsletters and supporting CTG

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CTG relies on donations from its charity members to fund the work it does on behalf of the sector. If your organisation has not yet made a contribution to our work in 2017, please consider doing so – further information and a donation form can be found here.