CTG Newsletter – 19 April 2017

General election announced (8 June 2017)

The Prime Minister has announced plans to hold a general election on 8 June 2017. This proposal will be approved if two-thirds of MPs back a motion today (under Section 2 of the Fixed-term Parliaments Act 2011) calling for an early election. If approved Parliament will be dissolved on Wednesday 3 May. Given that government officials will shortly be entering a period of pre-election purdah it remains to be seen how certain policy initiatives will develop before the election. The House of Commons Library has published this useful guide on the implications of the election for Parliament.Charity Commission guidance on Charities, Elections and Referendums can also be found here.

CTG will share updates on the different parties’ manifesto pledges on tax and the voluntary sector as they are published.

Consultation on General Data Protection Regulation exemptions

DCMS has published a consultation calling on businesses and charities to offer their views on potential exemptions within the upcoming General Data Protection Regulation (GDPR) legislation. The EU’s GDPR will come into force in the UK from 25 May 2018 and the legislation contains certain derogations where the UK can exercise discretion over how provisions will apply.

CTG will be working with its Gift Aid practical issues working group to explore the implications of GDPR requirements for Gift Aid and data held by charities for tax purposes. There may also be specific rules relating to Churches and Religious Associations. Responses are due by 12 May 2017.

VAT appeals – Updates from HMRC

HMRC has updated its VAT appeals summary. Updates of note are that:

• HMRC will not be appealing the Upper Tribunal decision dismissing its appeal in the Caithness RFC case so the decision is final
• HMRC is appealing the Life Services Ltd decision to the Upper Tribunal with the hearing due 9 to 10 October 2017
• HMRC is not appealing the decision in the University of Newcastle case
• It has been confirmed that the Court of Appeal hearing in the University of Cambridge investment management fees case is listed for 13 or 14 December 2017.

OTS VAT Review – feedback requested

Members are reminded that CTG representatives will be meeting officials from the Office of Tax Simplification (OTS) later this month to discuss their ongoing VAT Review. The main focus areas are:

1. Identifying the implications of a high registration threshold.The UK VAT registration threshold, at £83,000, is much higher than most other countries’ (generally closer to £20,000 across all countries with a VAT system or equivalent). This influences and distorts business behaviour. Would it be less distortive if the UK’s threshold were lowered to bring in more businesses? If so, how would those small businesses cope? What would be the impact of raising the limit to remove more businesses from VAT? Or could the ‘cliff edge’ of registration be managed better?
2. Multiple rates: Causes of complexity. The UK currently has in effect four different VAT rates: the standard 20% rate, the 5% reduced rate, a zero-rating, and exempt goods and services. The definitions—and practical application of definitions—of items within each rate cause a lot of complexity. How might this be simplified?
3. Partial exemption, option to tax and capital goods scheme. These have been raised as some of the most complicated areas of VAT. Many more businesses now seem to be affected. Can they be simplified? Or are there ways to amend them to reduce their range and impact?
4. Special Accounting Schemes. There are several schemes, including the flat rate scheme, retail schemes, tour operators margin scheme and annual accounting scheme, generally designed to simplify the VAT regime. Business practices and technology have changed significantly since they were designed, so are these schemes working appropriately today? Do they need improving – or are any in fact no longer needed?
5. VAT and Making Tax Digital (MTD). HMRC’s MTD plans encompass VAT so that brings opportunities and risks. Which areas of the VAT regime need to be simplified to better fit into MTD? And what simplification could MTD bring to the VAT regime – how would the special accounting schemes be affected?

The OTS is looking for CTG to present solutions as well as identifying obstacles in the current system. We would welcome feedback from members to these specific questions as well as thoughts on ways any broader VAT issues could be resolved. Please send any feedback to info@charitytaxgroup.org.uk by 20 April 2017.