CTG Newsletter – 24 November 2017

Budget 2017

A reminder that CTG’s full coverage of the Autumn Budget 2017 can be read here.

Changes to the Gift Aid donor benefit thresholds

In the Budget the Government announced that it will replace the current three tier thresholds with two thresholds. Under this reform donors will be no worse off in terms of the value of benefits that charities can offer them as the new limits will be, for every eligible donation, at least as generous as the current limit. This “spliced” two threshold solution was advocated by the Charity Tax Group (CTG) in its consultation response and should help to avoid the problems of the cliff-edge effect that many charities currently face (and which can lead them to not claim Gift Aid at all).

Under the new limits the benefit threshold for the first £100 of the donation will remain at 25% of the amount of the donation. For larger donations charities can offer an additional benefit to donors, up to 5% of the amount of the donation that exceeds £100. Some examples are provided in the table below. The total value of the benefit that a donor can receive remains at £2,500. The changes will have effect from 6 April 2019.

Further details on how the thresholds will apply in practice can be found here.

Taxation of trusts

The Government made a commitment in its manifesto at the 2017 General Election to tackle the misuse of trusts and reforms are aimed at increasing trust transparency to help tackle the misuse of trusts for tax purposes. The transparency reforms would be consistent with the wider action taken since 2010 around improving disclosure and information to help reduce tax avoidance and evasion.  Since Budget Day, HMRC officials have confirmed to CTG that when the consultation is published in 2018, they are committed to consultation with stakeholders including charities.

Finance (No.2) Act 2017

The Finance (No.2) Act 2017 is now in force following Royal Assent on 16 November 2017. The Act introduces:

• A penalty for transactions connected with VAT fraud – See Edd Thompson and Juliet Bailey’s commentary here.
• Corporation tax relief for Museums and Galleries exhibitions
• Changes to the Social Investment Tax Relief (SITR) scheme.
• Legislation to allow the Government to pursue its Making Tax Digital agenda.

The full Finance Bill 2018 is due to be published on 1 December 2017.

HMRC Trusts Registration Service – FAQs on beneficiaries updated

We have reported previously that if a trust is already registered for income tax or capital gains tax and the trustees of the trust have incurred a relevant UK tax liability (income tax, capital gains tax, inheritance tax, stamp duty land tax, stamp duty reserve tax, land and buildings transaction tax (Scotland)) in a given tax year, then registration through the new HMRC Trusts Registration Service (TRS) must be completed by no later than 31 January after the end of that tax year.

The trustees of a charitable trust will not have to register until they incur a liability to pay any of the relevant UK taxes. If after claiming a tax relief the trustees have not incurred a liability, in a given tax year, to any of the relevant UK taxes then HMRC would not expect them to register on the TRS.

However, ALL charitable trusts are expected to maintain accurate and up-to-date written records of “beneficial owners” under reg 44(1). Following queries from CTG, the Charity Law Association and others, HMRC has updated the section on details of the beneficiaries in its FAQs on the new Trust Registration Service. HMRC has now clarified the position and included examples in updated FAQs.

Previous guidance  for trustees in relation to the use of a “class” to describe the beneficiaries of a trust stated that if any member of a class of beneficiary could be “determined”, by for example when a beneficiary is born or is known by his or her name, then we expect trustees (or agents acting on behalf of trustees) to disclose their identity details on the Trust Registration Service (TRS).

HMRC officials have confirmed that having listened to stakeholder feedback about this interpretation of the legislation (specifically regulations 6(1)(d), 45(2)(d) and 45(8)) they have revised our position to allow trustees to make appropriate use of the description of the “class” in order to describe the trust’s beneficiaries, where not all of those beneficiaries have been determined. Where a beneficiary is named on a trust instrument separate from members of a named class then they can clearly be determined and trustees must provide the relevant information.  This is unchanged.  Where a beneficiary is un-named, being only part of a class of beneficiaries, a trustee will only need to disclose the identities of the beneficiary when they receive a financial or non-financial benefit from the trust after 26 June 2017 – the commencement of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017.

Tax Strategy – Definition of “turnover”

CTG has now received formal written confirmation that for the purposes of the Tax Strategy rules, the definition of turnover will be the same as that for the Senior Accounting Officer rules: “Corporates which are charities almost certainly receive donations and other voluntary income which does not derive from the provision of goods and services. This would not therefore constitute turnover”.

This will mean a number of charities will fall below the £200m turnover threshold above which a Tax Strategy is required to be produced. Our understanding from HMRC is that voluntary income will be interpreted widely to income grant income and income generated from the sale of donated goods.

Charities still have the option to provide a Tax Strategy if they wish, but this provides greater flexibility and ensures consistency in definitions across legislation and guidance.

Further details and background can be found here.

Charity Commission consultation on Annual Return 2018

Following feedback from members, CTG has responded to the Charity Commission consultation on proposed changes to the charities Annual Return for 2018.

CTG Newsletter Archive

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

• CTG Budget Update – 22 November 2017
• CTG Newsletter – 21 November 2017
• CTG Newsletter – 17 November 2017
• CTG Newsletter – 14 November 2017
• CTG Newsletter – 8 November 2017
• CTG Newsletter – 6 November 2017
• CTG Newsletter – 2 November 2017
• CTG Newsletter – 1 November 2017
• CTG Newsletter – 26 October 2017
• CTG Newsletter – 25 October 2017

CTG’s VAT case law tracker has also been recently updated.

Expert Commentaries

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

• VAT case relating to ‘single supply’ and zero rated printed material (Graham Elliott)
• Corporate Criminal Offence – implications for charities (Ian Short and Tania Dimitrovich-Archer)
• Definition of a ‘sport’ for VAT purposes – English Bridge Union case (Graham Elliott)
• Relevant Residential and Relevant Charitable buildings: Clawback provisions – Balhousie Holdings case (Graham Elliott)
• Proposed new penalties for participation in VAT fraud (Edd Thompson and Juliet Bailey)
• Summary of recent VAT cases on partial exemption, sports supplies & charitable annexes (Graham Elliott)
• Benefits of joining the CTG Gift Aid practical issues working group (Keren Caird and Donna Perry)
• Iberdrola VAT case – Implications for Sveda? (Dermot Rafferty)
• 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)
• 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.

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