Download Budget 2015 Charity Finance Group Briefing

Budget 2015
Charity Finance Group
Briefing
18th March 2015
As the last Budget before the General Election, the Chancellor today was firmly focused on vote winning
initiatives. However there were a number of announcements that will impact the charity sector and will be
carried through into the next Parliament.
Headlines for the Charity sector:
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Gift Aid Small Donations Scheme donations limit raised from £5,000 to £8,000 –
increasing maximum top up payment by £750 per charity
Social VCTs to be created to enable indirect investors to access Social Investment
Tax Relief
Subsidised fundraising training for small charities to be funded by the Office of
Civil Society
‘Far-reaching reform’ of business rates promised by Chancellor
This briefing provides a summary of the highlights of Budget 2015, including those of particular interest to
the charity sector. We have also asked some of our corporate subscribers to put forward their initial
responses to measures announced in the budget which are in the relevant sections.
Useful links
Full Budget 2014 report
Office for Budget Responsibility Economic and Fiscal Outlook – March 2015
Budget 2015 – Missed opportunities and targeted giveaways
#volsecbudget – What should charities look out for?
Can charities help end the ‘pushmi-pullyu’ of local government spending to support prevention?
Capacity building – a dividing line in 2015?
If you would like to discuss any of the issues arising from Budget 2015, please contact the CFG policy team
at [email protected] or on 020 7871 5477.
Charities
Gift Aid Small Donations Scheme
The biggest announcement for the sector was the increase in Gift Aid Small Donations Scheme
(GASDS) donation limit from £5,000 to £8,000. This will mean that charities can receive up to £750 more
in top up payments from government then they could previously.
CFG has called on the government to bring forward a review of the scheme, which is not currently meeting
targets because of its complexity and design. The decision not to review the scheme is, therefore,
disappointing and will mean that many small charities will not benefit from this increase. CFG will continue
to work with officials to improve the scheme.
Comment from Kingston Smith
“The amount of tax relief to be paid pad out under GADS for the year ended 31 March 2015 is estimated to
be £23 million. This is a mere fraction of what was anticipated when the scheme was first introduced.
Hopefully, the increase in the amount of relief will encourage its greater use.”
Subsidised fundraising training for small charities
The Office of Civil Society will be funding subsidised training for small charities on fundraising in 2015-16
and will be seeking partners to deliver this from within the sector.
CFG has previously asked the government to provide more funding to build the fundraising capacity of
smaller organisations, given the help that they need to adapt to the changing funding environment. This
follows on from a recommendation in CFG’s budget submission.
Comment from Graham Batty, Associate Director at Baker Tilley
“Some good news was an increase in the claim limit under the Gift Aid Small Donations Scheme to £8,000
from April 2016. This allows charities to claim a gift aid like top up payment on small cash donations and
the increase will be worth up to £750 per annum to claiming charities. The new Digital Giving regime is
also expected to come into effect from the same date. These coupled with the plan to offer subsidised
fundraising training to small charities will certainly be a help to many community based charities.”
Comment from Luke Savvas, Charity Tax Partner at Buzzacott
“This is all very good news but we also hope to see further announcements on wider measures such as the
simplification of the Gift Aid declaration and rules on benefits to donors, which have recently been under
consultation.”
Social Venture Capital Trusts
The government will allow for the creation of Social Venture Capital Trusts (Social VCTs) that can access
the Social Investment Tax Relief, which was launched in July last year. Investors will get 30% income tax
relief on their investments in them, as well as paying no tax on dividends or capital gains tax on disposal of
shares.
CFG welcomes the creation of a method for indirect investors to claim social investment tax relief and will
hopefully lead to more finance being made available to the sector. However, it is important that these
measures are backed up with support for charities to be able to access finance and make investment more
affordable.
Charity Authorised Investment Funds
The government will create a Charity Authorised Investment Fund structure which will bring charity
investment vehicles under regulation by the FCA but will also see a VAT exemption for investment
management costs, saving the sector an estimated £13m a year. Contact Charity Investors Group for more
information.
Extension of VAT rebate scheme to blood bikes
Blood bikes will now benefit from the VAT refund scheme alongside search and rescue and air ambulance
charities.
CFG called for the government to review the issue of irrecoverable VAT for the whole sector, as
irrecoverable VAT costs charities up to £1.5bn a year. Whilst targeted help for blood bikes, air ambulances
and search and rescue is very welcome, it needs to be a prelude to a wider discussion on how we tackle
irrecoverable VAT.
Orchestra tax relief
The government will provide tax relief for orchestras at a rate of 25% on qualifying expenditure from 1 st
April 2015. The full design of the relief will be published shortly.
CFG welcomes relief for this important part of the cultural sector.
The economy
To accompany the Budget, the Office for Budget Responsibility (OBR) also publishes forecasts for the
economy and public finances, updated to reflect the budget policy measures. The OBR uses the forecasts
to judge whether the Government remains on course to meet its medium-term fiscal objectives.
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Growth has been revised upwards to 2.5% in 2015 and 2.3% in 2016 due to lower oil prices and
lower inflation.
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The deficit (public sector net borrowing) has fallen from 5.6% in 2013-14 to 5% in 2014-15 and is
due to fall to 4% in 2015-16. There is no change from the Autumn Statement.
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Public sector net debt is due to peak in 2014-15 at 80.4%, before fall to 71.6% by the 2019-20.
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Unemployment has fallen by 102,000 to 1.86m in the three months to January 2015. The
employment rate for the economy (the percentage of economically active people in work) has
reached a record high (73.6%). Unemployment is expected to fall to 5.3% by the end of the year.
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Employment is due to rise from 30.7m to 31.9m in 2019, an increase of 100,000 since the Autumn
Statement.
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Inflation (CPI) has been revised down significantly from 1.2% to 0.2% in 2015 – this is primarily due
to lower oil prices.
CFG will be producing an Economic Outlook Briefing in April, which will include official economic trends and
forecasts, details of sector research and expert insights into the state of the economy and charity sector.
Departmental budgets
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The Chancellor has reduced the planned surplus in 2019-20 from £23bn to £7bn which means
less austerity towards the end of the Parliament. However to reach his deficit reduction targets
cuts in the middle of the Parliament have been accelerated.
The current spending period ends in April 2016 and the next government will likely undertake a
detailed Spending Review which will outline the scale, pace and distribution of departmental
spending cuts.
Tax
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The Chancellor will increase the tax-free personal allowance from £10,600 in 2015-16 to £10,800
in 2016-17 and £11,000 in 2018-18.
o This could reduce the pool of people able to claim Gift Aid as they are lifted out of the tax
system charities will need to be aware when receiving donations.
The threshold for the 40p income tax rate will increase by above inflation from £42,385 in 201415 to £43,300 in 2017-18.
A fuel duty rise due in September has been cancelled.
The annual paper tax return is to be abolished with tax returns moving online.
The transferable tax allowance for married couples is to rise to £1,100.
The government has committed £75m over five years to support military charities and
commemorations.
There was no firm announcement that charities would be excluded from the ‘diverted profit tax’ to
stop large companies artificially lowering their tax bills. However, there is due to be clarification on
this shortly.
Comment from Kate Sayer, Partner, Sayer Vincent
“A potential problem for many charities with trading subsidiaries is the introduction of a new ‘diverted profits
tax’. This could have the unintended consequence of catching charities in an anti-avoidance measure to
stop international companies shifting profits to favourable tax havens.”
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Deeds of Variation for estates are to be reviewed to reduce inheritance tax avoidance.
o This could have an impact on legacy giving and details will be reviewed.
Comment from BHP
“At the moment it is possible for a will to be varied after death to increase the amount given to charity so
that the estate benefits from the lower rate of Inheritance Tax. Although expected, the announcement that
the use of Deeds of Variation will be reviewed is worrying news for the sector. If they are abolished, it will
not be possible to vary a will after death and legacy income received by charities may be affected.”
Pensions
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The government will reduce the amount of tax relief that can be claimed for pension pots
over a person’s lifetime from £1.25m to £1m from April 2016.
Pensioners will be allowed to access their annuities without incurring 55% tax charge and tax will be
applied at the marginal rate.
Welfare
The Office of Budget Responsibility has found that the government will meet its welfare cap, which was set
at £119.7bn for 2015-16.
The amount of tax free child care that parents of disabled children can receive has been increased from
£2,000 to £4,000 per disabled child per year.
Business and regulation
The Chancellor stated that he wanted to see ‘far-reaching reform’ of business rates and a review has been
published.
Although charities are not the aim of this review, it could have a significant impact on charities and CFG will
be responding to this review on behalf of charities. If you would like to contribute to this review, please
contact [email protected]