In a submission in advance of the 2017 Budget, the Charity Tax Group (CTG) has outlined a number of policy areas on which the Government could take action to improve the tax position of charities.
CTG Chairman John Hemming commented:
“The Budget presents an important opportunity for the Government to demonstrate its continued support for charities. This should include a commitment to review the scope of VAT refund schemes to tackle the pressure of irrecoverable VAT; extending Apprenticeship Levy contributions to volunteer training costs; consideration of ways to mitigate the impact of Insurance Premium Tax increases on the sector; and the reintroduction of the Research and Development Credit for non-university charities.
“As tax policies are developed we urge officials to continue to consult key stakeholders, to avoid unintended consequences and identify important opportunities for simplification of the tax system for charities.”
How the Government can help charities:
1) Tackling irrecoverable VAT
- By continuing to work with the sector to develop further s33 refund schemes.
- By working with the sector to identify opportunities for new reliefs for charities, reflecting the modernisation of charity operations and innovations not covered by the existing zero rates.
- By actively listening to the voice of the charity sector as part of Brexit negotiations, particularly in relation to the operation of the VAT system.
2) Insurance Premium Tax (IPT)
- By committing to a review of the current IPT burden faced by charities to assess whether a total or targeted exemption or a reduced rate would be achievable where the insurance is required to cover activities or premises that directly relate to a charity’s objects.
3) Research and Development Credit (RDEC)
- By supporting claims made by research charities for any qualifying expenditure they incurred prior to 1 August 2015.
- By reinstating RDEC as a relief for non-university charities.
- By engaging in a dialogue with charities as to how bio-medical research could be further stimulated by charities through targeted tax reliefs.
4) Employer-provided Living Accommodation
- By committing to protecting this exemption as part of the consultation on Employer-provided Living Accommodation.
5) Apprenticeship Levy
- By permitting charities to assign to other charities any unused Levy credits at a higher level than the 10% currently under consideration. This move would ensure that more funding is retained for charitable use.
- By allowing Levy funds to be used to pay for accredited volunteer training and associated expenses.
6) Transfer of profits
- By introducing in the next Finance Bill an exemption for charitable companies from the legislation on the transfer of corporate profits.
7) Making Tax Digital
- By introducing an exemption from digital record keeping for charities, while providing resources and support for those charities that wish to opt in.
8) Administrative burden of tax issues
- By committing to a review of the administrative burden of tax policies on charities and more detailed consideration of associated costs when compiling Impact Assessments.
- By providing, where possible, free tax reporting tools for charities.
9) VAT Grouping and the Cost Sharing Exemption
- By committing to a review of the rules relating to VAT Groups and the Cost Sharing Exemption in respect of charities.
Notes for editors
The Charity Tax Group (CTG) has over 500 members of all sizes representing all types of charitable activity. It was established in 1982 to make representations to Government on charity taxation and it has since become the leading voice for the sector on this issue. CTG has persuaded successive Governments to introduce a range of tax reliefs and has also campaigned successfully to protect existing concessions, saving charities a considerable amount of money in the process.
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