CTG Newsletter – 8 November 2017

OTS VAT Review

The Office of Tax Simplification (OTS) has published its VAT review which offers a range of proposals for simplifying the tax. The report follows a Call for Evidence at the start of 2017, to which CTG submitted a detailed response, following a meeting with OTS officials.

CTG will be undertaking a detailed review of this report but welcomes the recognition by the OTS that guidance needs to be updated regularly and that the administration of VAT (including the administration of the partial exemption rules) should be simplified.

Review of the current reduced rate, zero rate and exemption schedules, could, as our response to the Call for Evidence demonstrates, ensure that VAT reliefs are future-proofed (and able to cope with technological developments) and fit for purpose, as well as identifying opportunities for supporting charities through the VAT system. However, at the same time, it is important that this process does not result in inadvertent costs for charities and there is no removal of the invaluable zero rates charities benefit from. Importantly the report highlights the VAT disadvantage for organisations (which includes charities) that provide outsourced services (such as adult social care) compared to their local authority/ NHS equivalents) and the need for a review of VAT arrangements in these circumstances. Suggestions to improve the rulings and penalties processes are also very welcome.

OTS Core Recommendations 

1. The Government should examine the current approach to the level and design of the VAT registration threshold, with a view to setting out a future direction of travel for the threshold, including consideration of the potential benefits of a smoothing mechanism
2. HMRC should maintain a programme for further improving the clarity of its guidance and its responsiveness to requests for rulings in areas of uncertainty
3. HMRC should consider ways of reducing the uncertainty and administrative costs for business relating to potential penalties when inaccuracies are voluntarily disclosed
4. HM Treasury and HMRC should undertake a comprehensive review of the reduced rate, zero-rate and exemption schedules, working with the support of the OTS
5. The Government should consider increasing the partial exemption de minimislimits in line with inflation, and explore alternative ways of removing the need for businesses incurring insignificant amounts of input tax to carry out partial exemption calculations
6. HMRC should consider further ways to simplify partial exemption calculationsand to improve the process of making and agreeing special method applications
7. The Government should consider whether capital goods scheme categoriesother than for land and property are needed, and review the land and property threshold
8. HMRC should review the current requirements for record keeping and the audit trail for options to tax, and the extent to which this might be handled on-line.

The report includes a further 15 secondary recommendations. Details of these recommendations and links to the full report can be found here.

VAT case law tracker

CTG’s VAT case law tracker has been updated to reflect judgments reported on the website in the last few months, including Will Woodlands, Balhousie, various CJEU cost-sharing decisions, Litton & Thorners Community Centre and Littlewoods.

Cases likely to be of note in the next few months include the Life Services (October 2017) University of Cambridge (December 2017) and Wakefield College (February 2018)

The tracker now includes links to summaries of 39 recent VAT cases and will continue to be updated as judgments are published. If you are aware of a recent case that has not been included and/or would like to submit a commentary on a VAT case please let us know at info@charitytaxgroup.org.uk.

Retail Gift Aid survey

CTG is working with the Charity Retail Association (CRA) as part of an HMRC Retail Gift Aid working group. As part of this process, HMRC is willing to review a proposal to set a de minimis limit for Retail Gift Aid claims. Under the current rules donors have to be contacted about the value of the sale of their donated goods and the associated Gift Aid claimed, even if the value of the sale and the Gift Aid is very low. It has been suggested that a de minimis level of £20 would save affected charities thousands of pounds.

The CRA is currently running a survey to gain feedback on financial, administrative and reputational costs of their currently being no de minimis limit.  You can respond to the survey here.

HMRC VAT guidance on pension fund management services updated

HMRC has published Revenue and Customs Brief 3 (2017): VAT – treatment of pension fund management services. The Brief notes that relevant court cases on this issue (including ATP) have now concluded, and it is now clear that there will be no further review of the EU rules in this area before the UK exits the EU. In light of this, HMRC is updating its policy to reflect the settled case law. Consequently, the policy of allowing insurers to treat their supplies of non-SIF pension fund management services as VAT exempt insurance is to be discontinued. This policy change will apply from 1 January 2018.

Tax Updates in Cardiff (16 November) and Manchester (27 November)

CTG has organised tax update meetings for charities and advisers this November, in Cardiff and Manchester. Both sessions will review recent policy developments and providing practical tax updates and will include a presentation on recent Gift Aid developments, by Steve Carroll, from HMRC’s Charities Outreach team.

Other topics to be covered will include: Implications of Brexit for the sector, review of recent VAT case law, Making Tax Digital, Business rates developments and Autumn Budget 2017.

Both seminars will take place from 14:00 to 16:00, with a sandwich lunch available from 13:00. You can register for each event by following the link below:

• 16 November 2017, in Cardiff, in association with Deloitte
• 27 November 2017, in Manchester, in association with EY

Round up of other topical developments

• Class 2 NICs: On 2 November 2017 the Government announced a one year delay to the abolition of Class 2 NICs (at which point Class 4 contributions will be restructured to include a new threshold). Class 2 NICs will now be abolished from 6 April 2019 rather than 6 April 2018. The delay will allow time for the government to engage with interested parties with concerns about the abolition. HMRC has published a policy paper, summary of responses to its consultation and draft legislation
• Charitable Giving Indicators: DCMS provides funding to the 15 sponsored museums and other cultural institutions through charitable giving and Grant-in-Aid. This report presents the total amount of charitable giving to DCMS-funded cultural institutions and the ratio of charitable giving to Grant-in-Aid. No figures are included in respect of the value of Gift Aid on these donation.
• Barclay Review of Business rates: In response to a parliamentary question, the Scottish Government has confirmed that it is engaging stakeholders further to inform its consideration in respect of the recommendation on charity relief (ie for it to be removed from independent schools) from the Barclay review of non-domestic rates. Further detail will be set out in the context of an implementation plan by the end of 2017.
• Finance Bill: Finance (No.2) Bill 2017 will be published on Friday 1 December 2017 as per a Written Ministerial Statement by the Financial Secretary to the Treasury. The Budget will be published on 22 November 2017.
• New Welsh taxes: As part of the draft Budget, the Welsh Finance Secretary has announced a shortlist of four new tax ideas – a disposable plastic tax; a levy to support social care; a vacant land tax and a tourism tax.  The shortlist has been drawn up following feedback from the public about ideas for a new tax after the Finance Secretary said he would test the Wales Act 2014 powers, which allows Wales to propose new tax ideas in devolved areas.

CTG Newsletter Archive

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

• 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 Newsletter – 17 October 2017
• CTG Newsletter – 10 October 2017

Expert Commentaries

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

• 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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