CTG Newsletter – 23 March 2017

CTG secures charity exemption to 45% tax on restitution interest

CTG is pleased to announced that following detailed discussions with HMRC and HM Treasury officials, the Government has introduced a charity exemption to the 45% tax on restitution interest, first announced in Autumn Statement 2015. CTG had highlighted the adverse implications for charities and produced a detailed policy paper outlining the incorrect rationale behind the policy.

This is particularly important in the context of the ongoing Littlewoods litigation on compound interest which is due to be resolved at the Supreme Court this summer. This exemption will benefit charities who have made a claim against HMRC for, or who have received restitution interest from, HMRC (including Fleming/Conde Nast VAT repayment claims). Estimates of the affected compound interest range from thousands to millions depending on the size of the charities involved and worth up to £50m alone for those charities that have already contacted CTG. Further background details about this issue and CTG’s negotiations with officials can be found here.

Responding to the confirmation that the new Regulations had been laid, CTG Chairman, John Hemming commented: “This was a classic case of charities being unintentionally disadvantaged by the tax system. I am delighted that once CTG highlighted the potential adverse and inappropriate impact on the sector, officials and Treasury Ministers resolved to work with us to protect charities. Subject to the outcome of forthcoming litigation this exemption could save charities many millions of pounds.”

Adecco appeal on the VAT treatment of temporary workers dismissed

CTG’s technical adviser, Graham Elliott, has written a commentary on the recent Adecco case, in which the appeal against HMRC’s VAT treatment of temporary workers was dismissed. This decision will be disappointing for many charities who, with CTG, had felt that a needless barrier to flexible working practices had been created by the huge tax differential between ‘old fashioned’ employed staff and the more flexible model of human resource usage entailed in temporary workers.

CTG’s VAT case law tracker has been updated to reflect this.

Charity closed after failed attempt to benefit from business rates scheme

The Charity Commission has published the report of its inquiry into Africa Relief Trust (former registered charity number 1077946). The Commission concluded that the trustees mismanaged the charity because they did not undertake appropriate due diligence and failed to manage the risks of a business rates scheme they entered into. This is a cautionary tale for charities and it is important that the sector continues to ensure business rates relief is applied correctly, given its immense value to charities.

European tax policy survey

The European Commission’s Directorate-General Taxation and Customs Union (TAXUD) has published the first edition of a survey on tax policies in the EU. The survey provides a summary of recent tax policy reforms in Member States to illustrate how decision makers are seeking to use the tax system to achieve the twin objectives of economic stability (efficiency) and social justice (fairness). It presents elements of the design and governance of Member State tax systems that influence these key characteristics. It also puts forward and substantiates the tax policy priorities for the next European Semester cycle.

Members are reminded that CTG recently responded to the European Commission’s Review of VAT rates, supporting greater flexibility for Member States in introducing reduced and super reduced rates.

Dates for your diary

28 March 2017

• The new £1 coin will enter circulation.

1 April 2017

• New rules for VAT relief on substantially and permanently adapted motor vehicles for disabled wheelchair users will become effective.
• The VAT registration and deregistration thresholds will increase.
• The rates of the National Minimum Wage will increase.
• The Museums and Galleries Tax Relief  will become effective.

6 April 2017

• New Off-payroll working rules for public sector employers come into force.
• Apprenticeship Levy payments will be collected by HMRC via PAYE from April.
• Provisions in the Small Charitable Donations Act 2017 will be effective.
• Provisions in the Donations to Charity (Gift Aid Declarations) Regulations 2016  affecting Gift Aid and intermediaries will be effective.
• The Social Investment Tax Relief will be enlarged.
• Benefits-in-kind provided under a salary-sacrifice scheme to be limited in many cases.

28 March 2017

• Annual Tax Conference (Waiting list only)

4 May 2017 

• Charity Tax Updates in Leeds.

Consultations tracker

CTG will be preparing responses 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.

• Ongoing – Insurance Premium Tax survey (CTG)
• Ongoing – Discretionary Charity Business Rates Relief (CTG)
• 7 April 2017 – £300m discretionary rates relief fund (DCLG)
• 11 June 2017 – Making Tax Digital: sanctions for late submission and late payment (HMRC)

CTG Newsletter Archive

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

• CTG Newsletter – 21 March 2017
• CTG Newsletter – 17 March 2017
• CTG Newsletter – 15 March 2017
• CTG Newsletter – 13 March 2017
• CTG Spring Budget Update – 8 March 2017
• CTG Newsletter – 3 March 2017

CTG Commentaries

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

• 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) NEW COMMENTS
• Holding companies are required to raise management fees in order to ensure VAT recovery (Dermot Rafferty)
• Update on “Economic Activity” and the fate of the Lord Fisher test (Graham Elliott)
• Filing charity trading subsidiary tax returns and charity accounts (Justin Bevan) NEW COMMENTS
• 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.

Help to promote CTG in 2017

Do you have colleagues/friends in other charities that would benefit from receiving CTG’s newsletters? If so, please share this link to a page with full details about membership. Thank you again for supporting CTG in 2017.

Website accounts

Charity and Observer Members are reminded that their membership is on an organisational basis and that there is no limit of the number of subscribers to the website per organisation. If you think a colleague would benefit from getting access to the website and newsletters directly, please encourage them to register online at www.charitytaxgroup.org.uk/join-us/ selecting your organisation from the drop-down box.