CTG Newsletter – 22 August 2017
Barclay Review of Non-Domestic Rates in Scotland
The Barclay Review of non-domestic rates in Scotland has published its report, making a series of thirty 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) (which include sports services, theatres, libraries, museums and galleries – usually funded by the council and there are 64 with charitable status in Scotland) to claim charitable rates relief to ensure a level playing field. Similar recommendations are made for as university buildings (including student accommodation and conference facilities) let out for commercial use outside term-time.
The report notes, for the avoidance of doubt, that removal of charitable status for any organisation is outwith the scope of this review and does not form part of this recommendation. However, CTG is always concerned at attempts to limit reliefs to charities that are seen as more or less deserving than others as this could set a dangerous precedent that could threaten to undermine the principle of charitable tax relief generally. Charities are also often penalised by the tax system compared to commercial organisations, so are themselves often not operating on a level playing field.
The authors of the report appreciate that these recommendations in this section may be controversial but note that there is precedent in Northern Ireland, for restricting certain educational, cultural and public sector bodies from receiving charitable relief. They note that in each case, it will be for the Scottish Government to decide whether to implement the recommendations in this section at once or to adopt a phased approach over possibly a number of years.
The report also highlights a small number of examples where charity relief has been awarded incorrectly in Scotland to some of the trading arms of the parent charity. The report recommends that a formal review be undertaken of the provision of charity relief in specific areas, to ensure that relief ceases to be provided to charities’ separately established trading arms and to correct any errors which have arisen. While this is a question of compliance with legislation as it already stands, it remains to be seen exactly how many charities would be affected by any review – please let us know if you believe your charity (both in Scotland and the rest of the UK) has been claiming incorrectly and would be caught by this at info@charitytaxgroup.org.uk.
A more detailed summary of the report can be found here. Members are reminded that responsibility for setting policy on business rates is devolved so the direct impact of the report is limited to Scotland only, although if the recommendations are implemented it may have longer-term knock-on effects.
Budget representations
HM Treasury is now accepting representations in advance of the Autumn Budget 2017. Submissions can be made via an online survey or by email before Friday 22 September 2017. The date of the Budget itself has not yet been confirmed but is expected some time in late November.
Following the Chancellor’s announcement in the 2016 Autumn Statement, there will now only be one fiscal statement each year, held in the Autumn. From 2018 there will be a Spring Statement, responding to the forecast from the Office for Budget Responsibility, for which no representations process will be opened. Further information can be found here.
New HMRC Gift Aid working group
Through the Charity Tax Forum, HMRC is setting up a new working group to consider ways to increase the effectiveness of UK Gift Aid relief.
CTG will be represented on this working group, but has also been asked to make recommendations about the composition of the group and its terms of reference (and HMRC’s draft is outlined below).
CTG will be working with its Gift Aid working group to identify key priorities and suitable charity representatives at the meeting, but if you are interested in being involved or have any comments on the Terms of Reference, please let us know at info@charitytaxgroup.org.uk by 31 August 2017.
Draft Terms of Reference (*For the information of members only and not be republished as still a draft*)
1. Purpose of the Group
- The Working Group will provide a discussion forum to consider and review the effectiveness of Gift Aid relief. This was originally introduced in 1990 with changes made in 2000 to make the scheme more like it still is today.
- The Group will consider the effectiveness of the relief, and consider possible areas for improvement with a view to increasing the take-up by eligible donors and reducing the number of ineligible donors.
- Included in the review will be the issue of enduring GADs which are not always updated when a donor’s circumstances change, the use of technology and data, Higher Rate Relief and guidance etc. Work on reviewing the issue of donor benefits has already started and will continue to be considered separately.
- The Group is not primarily a technical forum – if technical discussions, e.g. on questions over legislation or HMRC’s approaches to assessments, penalties, debt enforcement etc. are necessary they will take place separately with the conclusions being discussed within the Group.
- Any decisions required on whether any changes are made or not will be the sole responsibility of HMRC and Ministers but decisions will take into account the views of, and issues identified by, members of the Group.
2. Frequency of Meetings
- The group will meet every 2 months with meetings being scheduled in advance. Additional meetings will be arranged as necessary.
3. Role of the Working Group Members
- Each Group member has a responsibility to:
- Provide a view – both theirs and that of their members/associates – on concerns and issues arising
- Work with HMRC to ensure the charity sector is made aware of the review.
Round up of other topical issues
- Charity business rates relief: There has been national press coverage of new research by CVS, a property valuation company, which suggests that about 27% of private hospitals receive business rates relief, owing to their charitable status. The report queries whether NHS bodies should be granted equivalent relief, particularly as a recent revaluation of business rates, has increased NHS hospitals’ tax bill by 19% to £366m a year. The report made no reference to other tax benefits, enjoyed by NHS bodies but not charities, such as access to s41 VAT refunds.
- Off-payroll working: An update to HMRC’s guidance on off-payroll working rules in the public sector for intermediaries notes: “If you use Basic PAYE Tools, you don’t need to report non-taxable payments your company made to you”. Read Susan Ball’s commentary for further background information on this issue.
- Tax avoidance litigation: The Government has published summaries of litigation decisions where HMRC considered tax avoidance was involved.
- Gov.uk: HMRC has launched a consultation to identify areas of Gov.uk that users desire changes or improvements
CTG Newsletter Archive
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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.
Consultations
Given that there are not many formal Government consultations open at present, CTG would like to use this opportunity to collect feedback from members on a range of topical issues.
The information you provide is crucial to informing our representations to Government so please share any information you can via the relevant consultation page on the CTG website or by e-mailing info@charitytaxgroup.org.uk.
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