What the Spring Statement 2019 means for Charities

Chancellor Philip Hammond delivered his second Spring Statement on 13 March 2019. A general overview was provided on the economy with some important points arising including a number of consultations which could impact the sector.

There were no big changes directly made for charities however a number which general announcements which will impact the sector. A summary of these have been noted below;

Gift Aid – benefits provided to the donor

From 6 April 2019, the donor benefits rules that apply to charities who claim Gift Aid tax relief have been simplified. In order for a charity to continue to claim gift aid on donations, the maximum benefit that can be provided by the charity, back to the donor will be limited to:

• 25% on the first £100 of donation

• For any gift exceeding £100, the charity can offer a benefit of up to £25 plus 5% of the amount of gift exceeding £100.

• The maximum donor benefit that can be provided remains at £2,500 in total.

Charities need to ensure these limits are not breached in order to successfully claim gift aid.

The Gift Aid Small Donations Scheme (GASDS) applies to small donations where it is considered impractical to obtain a gift aid declaration. This limit will be raised from 1 April 2019 from £20 to £30, allowing individuals to continue to support charities with cash and contactless donations.

Making Tax Digital (MTD)

The new rules take effect from 1 April 2019 whereby taxpayers are required to move to a fully digital tax system. For some VAT registered businesses, including Charities, with more complex VAT requirements this date has been pushed back to 1 October 2019.

The government have confirmed that a ‘light touch’ approach to penalties will be adopted during the first year, meaning that whilst businesses are getting used to the change, no filing or record keeping penalties will be issued. The focus is to support business – not penalise – during this time of transition.

The government have also confirmed that they will not be mandating MTD for any new taxes and business’ in 2020.

VAT: Partial Exemption and Capital Goods Scheme

The government is looking into an improvement of the Partial Exemption regime and Capital Goods Scheme making it as simple as possible. Evidence is being requested to look at whether it can be simplified.

Apprenticeship Levy

As it stands, the Government covers the first 90% of the costs associated with apprenticeships, with the employer meeting the remaining 10%. Any employer with a pay bill of over £3m though, must pay the apprenticeship levy which is then used cover the 10% due from the employer.

At the Budget 2018 however it was announced that the level of co-investment would be halved to 5% and the amount that an employer can transfer to certain other employers would increase from 10% to 25%. The Chancellor announced that these changes will take effect from April 2019.

Employment Taxes

The IR35 that was put into effect in April 2017 will now be extended to the private sector as well as public from April 2020. These rules apply to an individual who supplies services via an intermediary, such as a limited company, to another person or entity but would be considered an employee should the intermediary not have been used.

Only medium and large businesses will be subject to the change. The government intends to use the Companies Act definition of a small company which means meeting two of the three criteria; turnover of £10.2 million or less, a balance sheet that shows £5.1 million or less and the company must only employee 50 employees or less.

To find out how Haines Watts can help your charity or not-for-profit, get in touch today.