Budget 2018 - changes for charities

The Budget contained some positive provisions for charities, which will apply from April 2019.

Gift Aid

Currently the Gift Aid Small Donations Scheme (GASDS) only applies to donations of £20 or less made by individuals in cash or by contactless payment. This limit will be increased to £30, in line with the limit for contactless payments in the UK.  GASDS allows charities to collect small cash donations without the need for a gift aid declaration.

There will be a relaxation in the retail gift aid administration rules to allow charity shops using the Retail Gift Aid Scheme to send letters to donors every three years when their goods raise less than £20 a year, rather than every tax year

Direct tax

Since 2000 charities have been able to carry out a small amount of non-primary purposes trading within the charity without incurring a corporation tax charge. This saves the extra administration costs of having to run small level trading through a subsidiary. The changes in the Budget will introduce a long overdue increase to the small trading tax exemption limits from April 2019, as below:

 

Current limits

Annual charity income

Maximum non-primary purpose trading turnover

Under £20,000

£5,000

£20,001 to £200,000

25% of your charity’s total annual turnover

Over £200,000

£50,000

 

New limits

Annual charity income

Maximum non-primary purpose trading turnover

Under £32,000

£8,000

£32,000-£320,000

25% of income

Over £320,000

£80,000

 

Employment Taxes

The off-payroll working provisions which apply to the public sector are to be rolled out to the private sector from 2020, but will not apply to small entities. These rules impose an obligation on a business to determine whether a worker is employed or self-employed, even if they are providing their services through a company.

VAT

The Chancellor announced that the VAT registration threshold will be frozen at £85,000 for a further 2 years to 2022. This is to be welcomed, as a lowering of the threshold would have meant that more smaller businesses could have been required to comply with Making Tax Digital.

The Chancellor made a couple of announcements which recognised the burden that VAT places on charities. One area is the sale of commemorative items on behalf of veterans’ charities especially in this WW1 centenary year. Rather than waiving VAT on such sales, the government will a donation of £10m from the VAT they receive to the Armed Forces Covenant Fund Trust to support veterans with mental health needs.

In the same way, rather than introducing a reduced rate of VAT for the refurbishment of village halls, the government has promised to provide funding for grants equivalent to the VAT chargeable on such refurbishment projects. The current understanding is that the amount allocated to village halls will be £3m which will be accessible for one year.

Business Rates

The Government is cutting bills by one-third for retail properties with a rateable value below £51,000, benefiting up to 90% of retail properties, for 2 years from April 2019, subject to state aid limits. This should benefit those charity shops which are operated by trading subsidiaries and not currently protected by mandatory/discretionary relief.

Comment

Judith Pederzolli

Assistant Director, Business Tax
I am an Assistant Director in PEM’s Business Tax department. As well as providing general business tax advice I have a strong focus on property taxes, including Stamp Duty Land Tax and the Annual Tax on Enveloped Dwellings. Another of my specialist areas is advising on the direct tax issues facing charities and non-for-profit entities.

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