Implications of Budget Announcement on Not for Profit
Sector
Following yesterday's Budget announcement, Carol
Rudge, Head of Not for Profit at Grant Thornton UK
LLP comments;
Housing Associations to be hit by increase in top rate of stamp
duty land tax
In the Budget, the Chancellor announced the
introduction of a new 5% rate of stamp duty land tax (SDLT) for
transactions involving residential property, where the
consideration payable for the property exceeds £1million.
Carol Rudge Head of Not for Profit at
Grant Thornton says: "While housing associations are able to
take advantage of certain exemptions from SDLT, those reliefs are
often not available to non-charitable housing associations and
un-registered trading subsidiaries within housing groups. This
could therefore increase the cost of land and property acquisitions
for some social housing groups."
Threats from overseas
for UK charities?
The Government succumbed to pressures that have been emerging
from within Europe, to provide a level playing field between
charities based in the UK and in the EU. The proposals state that
charities based in the EU will in future benefit from the same tax
reliefs as those based in the UK. This will apply across all the
taxes, and so charities based in the EU will be able to take
advantage of the tax reliefs available to UK charities in relation
to income tax, capital gains tax; corporation tax; VAT; inheritance
tax; the various stamps taxes, and also Gift Aid.
Rudge says: "This means that the tax reliefs currently available
for gifts by UK taxpayers to UK charities will also be available to
gifts by UK taxpayers to charities based in the EU. This
could pose a threat to UK charities as their pool of donors will
have a wider choice of charities to which they are able to gift tax
efficiently. This could dilute the extent to which gifts are
received by charities based in the UK."
The Government has also announced that it will be consulting on
proposed changes to the present arrangements for Gift Aid claims by
charities. It is proposed that the number of "in-year" claims will
be restricted, as well as introducing new claim procedures.
Rudge says: "There is a concern that a restriction on the number
of "in-year" claims could put further pressure on charities'
cashflows at a time when they are already under pressure."
No news on substantial donor rules
The anticipated draft legislation on the revised substantial
donor rules failed to materialise, and no new rules on substantial
donors will be introduced in the Finance Bill. This is
despite considerable efforts by representatives of HM Revenue and
Customs (HMRC) and the charity sector over the last twelve months.
HMRC has blamed the delay on the need for the new rules to be
consistent with the tax relief that is to be made available for
gifts by UK taxpayers to charities within the EU.
Rudge says: "Although the Government has stated its commitment
to replacing the existing substantial donors to charities policy,
it is hoped that such a commitment will survive the election."
Emerging VAT issues
The Government has acknowledged the VAT costs created when
bodies in the not for profit sector work together to maximise their
resources and minimise costs. From now on, the Government will work
with charitable organisations to establish options for implementing
the EU cost sharing VAT exemption, currently being reviewed by the
European Commission.
Rudge says: "After many years of lobbying, the Government has at
last acknowledged the need to modify the system regarding VAT
costs. The change is a great step forward as it will now allow
charitable bodies to work together without the need to charge VAT
on the services provided."
With effect from 1 January 2011, VAT will be charged on all
postal services where the provision of those services has been
negotiated at a discount to face value. This will lead to an
increased level of irrecoverable VAT for those operating in the not
for profit sector.
Rudge says; "The changes lead to higher postal costs being paid
by not for profit organisations. The current discounted rate helped
to reduce overhead costs for already struggling charities hit by
the economic downturn at a time when they need all the help they
can get."
ENDS
For further information please
contact Nicola Daley at the Grant Thornton
press office on 020 7728 2244