CTG Newsletter – 17 February 2020
Influencing policy on charity taxation
Government reshuffle: new Charity Tax Minister confirmed
Following a Government reshuffle, the Prime Minister has confirmed his ministerial appointments:
- Rishi Sunak, formerly Chief Secretary to the Treasury, is now Chancellor of the Exchequer, following Sajid Javid’s resignation. CTG recently wrote to the Chancellor enclosing its Budget submission
- Kemi Badenoch has been appointed as Exchequer Secretary to the Treasury, replacing Simon Clarke. The Exchequer Secretary to the Treasury’s responsibilities include charities and Gift Aid, and CTG will be looking to meet her when she returns from maternity leave.
- Jesse Norman has been reappointed as Financial Secretary to the Treasury and he has responsibility for VAT and Finance Bills within his portfolio
- Oliver Dowden has been appointed Secretary of State at the Department for Digital, Culture, Media and Sport, replacing Baroness (Nicky) Morgan of Cotes. Dowden has overall responsibility for strategy and policy across the department, whose remit also includes the Office for Civil Society
- Baroness (Diana) Barron retains her role as Parliamentary Under-Secretary of State for Civil Society and Loneliness, at DCMS.
OTS: Claims and elections review scoping document
The Office of Tax Simplification (OTS) has published a call for evidence to identify opportunities for simplification, both in relation to claims or elections presently needed for certain reliefs or exemptions, as well as the processes involved. More information, as well as the full list of consultation questions, can be found here. Responses should be sent to ots@ots.gov.uk by 8 May 2020.
While the primary focus of the scoping review is not on charity related issues, there is a general request for feedback on other taxes. Charities are required to opt-in/make claims for number of tax reliefs, including claims for Gift Aid and issuing zero/reduced rate VAT certificates so simplification could really help. OTS Tax Director, Bill Dodwell, has indicated that he would be happy to engage with CTG on these points.
5MLD/Trust Registration Service: technical consultation
Members will recall that the Government has proposed that “charitable trusts are not in scope to register [for the Trust Registration Service] because the risk of these kinds of trusts being used for money laundering or terrorist financing activity is low”.
This was welcome news overall. At last week’s Charity Tax Forum meeting, HMRC officials encouraged charities to respond to the technical consultation (which closes on 21 February 2020), with evidence supporting the fact that charities are low risk, noting that there may be some pushback against exemptions from transparency groups. HMRC is also considering feedback from CTG on limited cases where charities may not be protected by the general exclusion for charitable trusts, under the current wording of the legislation.
Off-payroll working – are you interested in a stakeholder workshop with HMRC?
With the new off-payroll working rules due to be introduced in April 2020, the Government’s focus now is on customer readiness. CTG has collated a wide range of HMRC guidance notes and expert commentaries here. We understand that a number of charities are now being contacted by HMRC (most likely through their Customer Compliance Managers) inviting them to take part in an educational call regarding the off-payroll changes and being sent a “readiness” for off-payroll working questionnaire.
At last week’s Charity Tax Forum meeting, HMRC officials offered to co-ordinate off-payroll working stakeholder workshops for charities, in association with CTG and others. If your charity would be interested in participating in such a session, please contact info@charitytaxgroup.org.uk.
Facebook Donate
CTG continues to call on HMRC and Facebook to meet to discuss the audit process in place in relation to Gift Aid claims made on donations to Facebook. Two CTG members are due to attend a meeting with both parties in the coming month, but for unknown reasons confirmation of the date of this meeting continues to be delayed.
This is a high priority for CTG’s Management Committee and the following statement was included in CTG’s Budget submission: “Facebook Donate allows people to donate directly on social media pages through donate buttons inserted into page headers or posts. Donors are able to claim Gift Aid on eligible donations and Facebook then makes the Gift Aid claim information available to the charity to make the claim. But there has been uncertainty as to whether HMRC would agree the claims due to concerns about how charities could satisfy the HMRC audit process. Having reviewed the data received by charities, CTG believes that these concerns can be assuaged and has played an active role in facilitating discussions between HMRC and Facebook to resolve this issue, but a proposed meeting has continuously been delayed. Millions of pounds of potential Gift Aid claims are currently being held up, which only adds to the estimated £560m of eligible Gift Aid that HMRC estimates is unclaimed each year. Resolving this issue is a high priority for the sector and should be easy to address quickly. Furthermore, we are concerned that charity supporters have been led to believe that Gift Aid is being claimed on their donations when the HMRC stance does not currently allow this to happen. This issue is also one for any other third-party platform operating on a similar basis”.
Round-up of topical developments
- NAO report on HMT/HMRC management of tax expenditures: The National Audit Office (NAO) has published an interesting report on HM Treasury and HMRC management of tax expenditure , which includes some data on Gift Aid and VAT reliefs (principally VAT zero rating on construction of new dwellings – residential and charitable buildings). Read more here. The report highlights the lack of data in some areas, especially on VAT, which serves to highlight the importance of the CTG’s current VAT research project. The recommendations are a clear that there should be more scrutiny on the scope and impact of reliefs.
- Business rates cases: The charity Nuffield Health has successfully challenged Merton LBC over its decision not to grant mandatory business rates relief on a gym. The charity argued successfully that its gym (previously a commercial operation run by a separate entity) was used wholly or mainly for charitable purposes and was therefore eligible for 80% mandatory charitable rates relief. The full judgment can be read here. Elsewhere, the BBC has reported on a dispute between Lincolnshire Agricultural Society and the local authority over whether it meets to the requirements for charitable rates relief (primarily the extent of the mix between charitable and non charitable events put on).
- Real Estate Investment Trusts: CTG recently received a query highlighting cases in which charities may be paying withholding tax on Real Estate Investment Trusts (REIT) held within their investment portfolios, which they are not liable for. An updated entry on REITs, providing clarification for charities, can be found on the CTG website here.
- Making Tax Digital Webinar: A reminder that Civil Society has invited CTG members to participate in a free webinar (with HMRC’s Verna Gellvear) on 19 February between 12:30 and 13:30. Members may register here and are encouraged to submit questions in advance to info@charitytaxgroup.org.uk. Separately, HMRC has re-issued brief guidance on Making Tax Digital for landlords and sole traders who will be required to report income tax quarterly at some stage in the future, although it is still only a pilot and will not be mandatory.
- Minor updates to HMRC Charities guidance: Eagle-eyed CTG members may have noticed that HMRC’s Charities Guidance page was updated with information added to Chapter 2 and Annex ii. We checked with HMRC officials who confirmed: “the updates to both Chapter 2 and Annex II were minor corrections to legislative references. Paragraphs 2.1.2 of Chapter 2 and 9.3 of Annex II were updated to change references to the Charities Act 2006 to Charities Act 2011.”
- Future relationship with the EU: HMRC’s Agent Update 76 included the following update: “Now that we have left the EU we have entered a transition period that lasts until 31 December 2020. There will be no changes to the terms of trade with the EU or the rest of the world during this time. From 1 January 2021, the way businesses trade with the EU will change, and they’ll need to prepare for life outside the EU, including new customs arrangements. Last month, we contacted businesses in the UK who may import and export between the UK and the EU, to explain some of the actions they need to take to prepare forchanges to customs arrangements after the transition period, including:
- making sure they have a UK Economic Operator Registration and Identification (EORI) number
- preparing to make customs declarations by deciding if they want to use a third party such as a customs agent or make declarations themselves”.
- Following Exit Day, HMRC has withdrawn a collection of guidance on issues including tariffs, origin, and quotas, which was prepared for a potential no-deal Brexit. This guidance will be reviewed and updated by the end of the Transition Period.
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Support the Charity Tax Group in 2020
The Charity Tax Group is funded by voluntary donations from charities and subscriptions from professional members. Throughout its history, CTG’s work on behalf of the whole sector have effectively been subsidised by a small group of charities that make a donation each year. To ensure the long-term sustainability of CTG and to grow its work, we need as many charities as possible to make a financial contribution.
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On average smaller charities donate £200-£400, medium size charities donate £400-£800 and larger charities donate over £800 a year. Any contribution, however large or small, makes a big difference towards our work. If you are not sure whether your charity currently makes a regular donation, please let us know and we will be happy to tell you. A donation form can be downloaded here.
Financial support is of course very helpful, but we also rely on members for feedback to consultation and to help shape our policy work and representations to Government. If you have any questions about CTG’s work or would like to get more involved, please do not hesitate to contact us at info@charitytaxgroup.org.uk.
Resources
CTG has published a summary of its work over the last ten years, highlighting the impact of its representations, against a backdrop of austerity, Brexit, devolution and a Merry-Go-Round of charity tax ministers. You can also read a more detailed summary of charity tax developments and CTG’s work on behalf of members in 2019 here.
A full archive of CTG commentaries can be found here. If you would like to write a commentary for CTG, please get in touch. Recent newsletters can be accessed here and the updated VAT case law tracker can be read here.
CTG has published a Making Tax Digital (MTD) “mythbuster” for charities, addressing common misconceptions. In addition, following representations by CTG, HMRC has published an updated sign-up timeline for organisations (including charities) that had their MTD mandated start date deferred until October 2019.
A reminder that CTG now has a provisional date for the 2020 Tax Conference – Wednesday 20 May 2020, at the Wellcome Trust, in London. Further details will be confirmed soon.
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