The Charity Tax Group (CTG) today responded to announcements related to charities included in the Autumn Statement.
CTG Chairman John Hemming commented:
“A number of the announcements in today’s Autumn Statement are welcome for charities, including the broadening of the scope of the museums and galleries tax relief and the ongoing work on Gift Aid Intermediaries and GASDS.
“We are, however, concerned that the Government has increased Insurance Premium Tax (IPT) again to 12% by next summer. Charities are not exempt and many will face increases of thousands of pounds.
“We look forward to the forthcoming consultation responses on Making Tax Digital and employer provided living accommodation and hope that the Government has decided to introduce/maintain an exemption for charities respectively.
“We are also hopeful that the Government will take this opportunity to remove the restriction on charities claiming R&D Tax Credits, as this is an important support for research charities conducting vital projects and there is no logical justification for their removal from eligibility for the relief”.
Summary of issues relevant to charities
Museums and galleries tax relief – The Government will broaden the scope of the museums and galleries tax relief announced at Budget 2016 to include permanent exhibitions so that it is accessible to a wider range of institutions across the country. The rates of relief will be set at 25% for touring exhibitions and 20% for non-touring exhibitions and the relief will be capped at £500,000 of qualifying expenditure per exhibition. The relief will take effect from 1 April 2017, with a sunset clause which means the relief will expire in April 2022 if not renewed. In 2020, the Government will review the tax relief and set out plans beyond 2022. The relief is expected to be worth £30m a year.
Gift Aid Intermediaries – As announced at Budget 2016, the Government will give intermediaries a greater role in administering Gift Aid, simplifying the Gift Aid process for donors making digital donations.
Gift Aid Small Donations Scheme – Following the review announced at Autumn Statement 2015, the Government is amending the Gift Aid Small Donations Scheme to make it more accessible and flexible, and to ensure fairer treatment between charities that are structured in different ways. The Government has estimated that the changes will cost an additional £20m by 2021-22.
The use of banking fines – The government has committed a further £102 million of banking fines over the next 4 years to support Armed Forces and Emergency Services charities and other related good causes.
Tampon Tax Fund for women’s charities – The Government will award £3 million to Comic Relief to distribute to a range of women’s charities. The Government will also invite applications from charities from 1 December 2016 for the next round of Tampon Tax funding to support women’s charities, including those running programmes that tackle violence against women and girls.
Insurance Premium Tax (IPT) – The standard rate of IPT will rise to 12% from 1 June 2017. IPT is a tax on insurers and so any impact on premiums depends on insurers’ commercial decisions. A sample of 30 charities in 2010/11 for the Charity Tax Map project found the total cost of IPT was £591,000. IPT was only at 5% at the time so there will be a serious additional cost for charities.
Value Added Tax (VAT) – The Government will consult on VAT grouping and provide funding with a view to digitising fully the Retail Export Scheme to reduce the administrative burden to travellers.
Tackling exploitation of the VAT relief on adapted cars for wheelchair users – The Government will clarify the application of the VAT zero-rating for adapted motor vehicles to stop the abuse of this legislation, while continuing to provide help for disabled wheelchair users.
Making Tax Digital – In January 2017, the Government will publish its response to the Making Tax Digital consultations and provisions to implement the previously announced changes.
Tax simplification – The Government welcomes and has responded to the reviews the OTS has published this autumn, including on the alignment of income tax and NICs. The Government has now asked the OTS to carry out reviews on aspects of the VAT system and on Stamp Duty on share transactions.
R&D Tax Credit – The Government will review the tax environment for R&D to look at ways to build on the introduction of the ‘above the line’ R&D tax credit to make the UK more competitive as place to do R&D.
Housing – The Chancellor announced a £2.3bn Housing Infrastructure Fund to help provide 100,000 new homes in high-demand areas and £1.4bn to deliver a further 40,000 affordable homes. However, he also announced a further pilot of Housing Association Right to Buy – which is not such good news for housing associations.
Social Investment Tax Relief (SITR) – From 6 April 2017, the amount of investment social enterprises up to 7 years old can raise through SITR will increase to £1.5 million. Other changes will be made to ensure that the scheme is well targeted. Certain activities, including asset leasing and on-lending, will be excluded. Investment in nursing homes and residential care homes will be excluded initially; however, the Government intends to introduce an accreditation system to allow such investment to qualify for SITR in the future. The limit on full-time equivalent employees will be reduced to 250. The Government will undertake a review of SITR within two years of its enlargement.
Personal Allowance – The Government recommits to raising the personal allowance to £12,500 and the higher rate threshold to £50,000 by the end of the Parliament. Next year, the personal allowance will rise to £11,500 and the higher rate threshold to £45,000.
Welfare – the Chancellor stated that he had no plans to make further welfare benefit savings in the present Parliament beyond those already announced.
Business Tax Road Map – The government recommits to the business tax road map which sets out plans for major business taxes to 2020 and beyond, including cutting the rate of corporation tax to 17% by 2020, the lowest in the G20, and reducing the burden of business rates by £6.7 billion over the next 5 years.
Fuel Duty – The Government will freeze fuel duty from April 2017 for the seventh successive year.
Reform of loss relief – Following consultation, the Government will legislate for reforms announced at Budget 2016 that will restrict the amount of profit that can be offset by carried-forward losses to 50% from April 2017, while allowing greater flexibility over the types of profit that can be relieved by losses incurred after that date. The restriction will be subject to a £5 million allowance for each standalone company or group. In implementing the reforms the Government will take steps to address unintended consequences and simplify the administration of the new rules. The amount of profit that banks can offset with losses incurred prior to April 2015 will continue to be restricted to 25% in recognition of the exceptional nature and scale of losses in the sector.
Class 2 NICs – As announced at Budget 2016, Class 2 NICs will be abolished from April 2018, simplifying National Insurance for the self-employed. The Autumn Statement confirms that, following the abolition of Class 2 NICs, self-employed contributory benefit entitlement will be accessed through Class 3 and Class 4 NICs. All self-employed women will continue to be able to access the standard rate of Maternity Allowance. Self-employed people with profits below the Small Profits Limit will be able to access Contributory Employment and Support Allowance through Class 3 NICs. There will be provision to support self-employed individuals with low profits during the transition.
Off-payroll working rules – Following consultation, the Government will reform the off-payroll working rules in the public sector from April 2017 by moving responsibility for operating them, and paying the correct tax, to the body paying the worker’s company. The Government believes public sector bodies have a duty to ensure that those who work for them pay the right amount of tax. This reform will help to tackle the high levels of non-compliance with the current rules and means that those working in a similar way to employees in the public sector will pay the same taxes as employees. In response to feedback during the consultation, the 5% tax-free allowance will be removed for those working in the public sector, reflecting the fact that workers no longer bear the administrative burden of deciding whether the rules apply.
Salary sacrifice – Following consultation, the tax and employer National Insurance advantages of salary sacrifice schemes will be removed from April 2017, except for arrangements relating to pensions (including advice), childcare, Cycle to Work and ultra-low emission cars. This will mean that employees swapping salary for benefits will pay the same tax as the vast majority of individuals who buy them out of their post-tax income. Arrangements in place before April 2017 will be protected until April 2018, and arrangements for cars, accommodation and school fees will be protected until April 2021
Valuation of benefits in kind – The Government will consider how benefits in kind are valued for tax purposes, publishing a consultation on employer-provided living accommodation and a call for evidence on the valuation of all other benefits in kind at Budget 2017
Tax Enquiries: Closure Rules – The Government will legislate to provide HMRC and customers earlier certainty on individual matters in large, high-risk and complex tax enquiries.
Strengthening tax avoidance sanctions and deterrents – As signalled at Budget 2016, to provide a strong deterrent to those facilitating tax avoidance, the Government will introduce a new penalty for any person who has enabled another person or business to use a tax avoidance arrangement that is later defeated by HMRC. This new regime will reflect an extensive consultation and input from stakeholders and details will be published in draft legislation shortly. The Government will also remove the defence of having relied on non-independent advice as taking ‘reasonable care’ when considering penalties for any person or business that uses such arrangements.
Notes for editors
The Charity Tax Group (CTG) has over 500 members of all sizes representing all types of charitable activity. It was set up 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.
CTG’s Autumn Statement 2016 submission can be read here.
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