Not for Profit 2014 Budget update
Let me provide a brief summary of the more significant announcements made in the 2014 Budget that may be of interest to the Not for Profit sector. There was little of great significance for the sector as a whole, and that is probably the most concerning matter arising from the Budget as it shows the government is placing little importance on the sector.
Incentivising Social Investment
The tax relief on Social Investment has been set at 30% which is in line with venture capital trusts and the Enterprise Investment Schemes. This was an expected announcement but it is good to see that the government accepted the sector’s recommendations as to the level at which it was to be set. Comments in the sector say that this is a reasonable rate of relief but it should not be a rival funding source but one that attracts new money into the sector.
Targeting tax abusers
In the budget the Chancellor continued his theme of reducing tax avoidance and identified the abuse of charity status as part of the problem. Whilst it is expected that the sector will be relaxed about plans to make tax schemers pay over the planned tax saving up front until HMRC has agreed that their scheme is valid – HMRC’s ideas to tackle extreme tax abuse are potentially more problematic.
What wasn’t announced in the budget, but in recent discussion paper (released just before the budget), was how HMRC seek to strengthen the ‘purpose’ test to help identify those using charities for tax abuse. This is therefore at the establishment stage – but of course many do this legitimately, separating the saints from the sinners could be difficult. There certainly needs to be serious consideration of more creative alternatives, such as strengthening the arm of both the Charity Commission and those that scrutinise charity accounts, such as auditors, to blow the whistle to HMRC more readily than at present.
Tax rules outlined in the Autumn Statement are to be introduced from April 2014. HMRC have confirmed they will delay the introduction of penalty rules until April 2015 and the returns required by intermediaries will also be deferred until after this date. Based on this recent announcement those who are engaged by an intermediary will in most instances be considered employed workers for tax purposes and PAYE and National Insurance will need to be accounted for on payments they receive.
Fundraising and Gift Aid
Still there are positive messages about making gift aid simpler but no concrete changes.
The Gift Aid Small Donation Scheme will be publicised more to increase take up.
As previously mooted, the issue of benefits allowed to donors under gift aid rules will be reviewed.
All of the above clarifications and simplification by HMRC will be clearly welcomed.
Culture and history
The combined Cultural gift aid scheme and Inheritance Tax Acceptance in Lieu Scheme limit will be increased in 2014/15 by a third to £40m per annum, and technical changes to the legislation will also be made.
Cathedrals will be pleased to learn that there will be £20m provided over 2 years from April 2014 for the grant repair scheme.
The successful film tax credits scheme is now extended to theatres from September 2014 to support both touring and other theatre productions.
Tax reliefs on cash gifts from companies will be allowed for CASCs in future, with details in the Finance Bill.
There were no major provisions for this sector but it was announced that there would be £100m for more apprenticeships, and support will be provided for these up to postgraduate level.
The budget announced £50m funding for early years pupil premium targeted at 3 & 4 year olds.
The 20% tax free childcare cap will now be extended to cover costs per child per annum of £10k, hence parents will be able to claim tax benefit of up to £2,000.