CTG Newsletter – 28 April 2017
Apprenticeship Levy update: VAT exemption and issues with suppliers/grantees
As the Apprenticeship Levy beds in we are starting to identify potential practical issues and questions facing charities and would welcome your feedback on your experiences to date.
- Are you facing increased costs from suppliers seeking to include the cost of the Apprenticeship Levy as part of employment costs for outsourced services (for example cleaning, facilities, security etc provision)? If so are you planning to pay it, challenge this and/or clarify what apprenticeship training the supplier has in place to benefit from the Levy?
- Are you including Apprenticeship Levy as an employment cost in your grant funding?
More generally we would welcome feedback from charities as to whether they expect to make use of their Levy contributions, and the extent to which all or part of that contribution has effectively been written off as an additional payroll tax. Please send all comments to info@charitytaxgroup.org.uk.
HMRC has also published an updated Notice 701/30 Educational and Vocational Training. It explains the treatment of funds taken from the new apprenticeship service account to pay external providers for apprenticeship training with effect from 1 May 2017. Apprenticeship training is covered by the VAT exemption but only to the extent it is funded by Levy contributions, so where the trainee or an employer pays part of the cost of the training from their own resources that part of the supply is not covered by the exemption. Further information is available here.
Finance Bill (no.2) Committee stage
Making Tax Digital changes postponed
The Government has decided to remove from the Finance (No.2) Bill 2016-17 the relevant clauses and schedules relating to its Making Tax Digital agenda. There is currently no suggestion that any of these proposals will be dropped entirely, only that the measures need to be properly considered and that legislating for them will be delayed until the “earliest opportunity, at the start of the new Parliament. Further information is available here.
In response to a query from the sector press CTG Chairman, John Hemming, commented:
“As was made clear at the recent CTG Tax Conference, HMRC is very committed to Making Tax Digital and this announcement represents a postponement for practical reasons rather than a cancellation. CTG is in discussions with HMRC officials about include charity trading subsidiaries in the Making Tax Digital pilot stage which is taking place in the coming months. We still have reservations about the logic for not extending the exemption to charity trading subsidiaries, and continue to convey these to officials, but, if this is not changed, we will be seeking further protections for charities, including consideration of a de minimis threshold to protect small subsidiaries and provision of free software and training”.
Insurance Premium Tax increases – charity exemption ruled out again
During Committee stage of the Finance (No.2 Bill) there was consideration of Clause 58 which legislates for the increase in the standard rate of Insurance Premium Tax from 10% to 12% as the Chancellor announced in the autumn statement 2016. This change will be effective from 1 June 2017. The Government again ruled out an exception for charities, highlighting the importance of the increase as a source of income, suggesting that charities already benefit from generous reliefs and noting that the tax was on insurers rather than consumers and it was up to them to decide whether to pass it on. Full analysis of the debate can be read here.
CTG Chairman John Hemming recently commented on the Government’s position:
“This Government revenue raiser has a disproportionate impact on charities (especially those with a large portfolio of operational buildings and extensive transport and travel commitments) and we have serious concerns about rumours that IPT may eventually be increased to 20%, in line with VAT. While the Minister is right to say that it is a tax on insurers we are not aware of any instances where the tax is not passed on to consumers, so that argument is not representative of practical reality. We would encourage all affected charities to complete our survey, the findings of which demonstrate the disproportionate impact of the increase on certain types of charity.
Museum and Galleries Tax Relief implementation postponed
HM Treasury officials have contacted CTG to provide a short update on the museums and galleries tax relief. The relief was due to be legislated in the Finance (No.2) Bill 2016-17. Due to the forthcoming election the Financial Secretary to the Treasury has now announced that, as is usual at this stage before an election to allow it to pass Parliament in the limited time before the dissolution, the Finance Bill would proceed on the basis of consensus and the government would not be proceeding with a number of clauses in the Bill, including the museums and galleries tax relief. The Financial Secretary also said there has been no policy change and the government would legislate for the provisions at the earliest opportunity in the next Parliament. It will be for the incoming government to decide what to recommend to Parliament.
Charity exemption to 45% tax on restitution interest receives formal approval
In Autumn Statement 2015 the Government announced new rules introducing a special 45% rate of Corporation Tax to be applied, from October 2015, to payments made by HMRC of certain awards of restitution interest. Having identified possible unintended consequences for charitable companies (charitable trusts are not affected), CTG held discussions with officials from HM Treasury and HMRC. These discussion resulted in a change in the law so that charitable companies are removed from the scope of the 45% rate, saving some charities potentially millions of pounds. The Corporation Tax Act 2010 (Part 8C) (Amendment) Regulations 2017 were laid before the House of Commons on 13 March 2017 and have now been scrutinised and approved.
CTG regional meetings
CTG is hosting a series of meetings for charities and advisers exploring recent policy developments and providing practical tax updates. These afternoon events are free and will be preceded by a sandwich lunch. The following meetings are planned, with further events to be confirmed for the autumn.
- 4 May – Leeds, in association with Wrigley Solicitors. Register here.
- 19 June – Birmingham, in association with BDO. Register here.
Consultations and case law 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.
CTG’s VAT case law tracker can be accessed here.
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