Raw deal from Darling's 2010 Budget but a few nuggets of cheer
The charity sector did not have much to celebrate from yesterday’s Budget
The full Economic and Fiscal Strategy Report and Financial Statement and Budget Report, March 2010, can be downloaded here from HM Treasury’s website. There was no further movement on Gift Aid reform, but there was a commitment to report on possible simplifications in the autumn. NCVO boss Stuart Etherington was ‘pleased a commitment has been made on basic bank accounts and that there was support for an international transaction tax’.
- commitment to work with charities and other organisations to remove the potential VAT barrier that exists for organisations seeking to share services (implementing the EU cost sharing exemption);
- support for the first social impact bond (SIB) pilots;
- the government has recommitted to investing up to £75m of Dormant Accounts money in a Social Investment Wholesale Bank as a minority stake in a private sector social investment fund of funds;
- it was announced that the Gift Aid forum set up to consider possible reforms and simplifications will report in the autumn; and
- the UK’s tax reliefs for charities and charitable giving will be extended to certain EU charities. Alongside this, a new definition of charity for tax purposes is being introduced and a number of other consequential changes are being made to the existing compliance regime and Gift Aid process.
Summary of economic position
GDP growth is forecast to rise to 3 to 3.5 per cent in 2011. This is slightly lower than the 2009 Pre-Budget Report forecast, reflecting a weaker outlook for the UK’s largest trading partner, the euro area. GDP growth is then expected to rise to 3.25 to 3.75 per cent in 2012. The public finances projections run off the bottom end of the range. The Bank of England’s mean forecast is around 3 per cent in both 2011 and 2012. The independent forecast average is rather weaker at 2.1 per cent in 2011, but with a wide range of 0.9 to 3.4 per cent reflecting the degree of uncertainty.
- To qualify for charity tax reliefs and exemptions a charity will have to satisfy a new definition of charity which includes a fit and proper test for trustees and key employees. Existing charities it seems will have to go through the procedures if they change the person in their organisation who submits tax returns or makes the Gift Aid claims. Guidance will be published soon on how HMRC will conduct the fit and proper tests and which trustees and officials from the charity they will apply to. Any person that HMRC considers likely to exploit charity tax reliefs for non-charitable purposes will fail the test.
- The new Charity Application Form will have to be completed by all new charities but also by existing charities who are claiming gift aid for the first time or who have to file a tax return.
- There will be a new form R68 for gift aid reclaims or other tax reclaims which we are told will be an ‘intelligent’ form that automatically works out the period of the claim and the amounts claimed as you enter the figures. This may be helpful indeed but will no longer be used to notify changes of address or bank details or nominated officials. Instead a new Charities Variation Form will have to be used to notify these details and a draft of the new form will be available in April.
- Finally, there will be additional obligations upon charities that send funds overseas to ensure that the funds are spent charitably. These burdens already exist in current legislation but it seems that the new rules will require charities to carry out appropriate checks before the money is sent. HMRC tell us that it will interpret these rules reasonably so as to not discourage UK charities from sending money overseas or penalise genuine charities that are unknowingly exploited by an overseas organisation or where speed is important in the case of a humanitarian disaster overseas.
- streamlining back-office processes − for example by sharing services with other overseas departments;
- making significant savings in procurement by reducing the rates we pay, improving the value we achieve and procuring collaboratively; and
- halving the amount spent on consultancy now that we have built up in-house skills, for example in finance, IT and procurement.
Author: Clarissa Dann
Clarissa Dann was the editor of Caritas as well as an HR and management online service,he People Bulletin until July 2011.
She is now the editor of the specialist trade finance magazine, Trade and Forfaiting Review which can be viewed at www.tfreview.com but does write on charity finance and investment from time to time.
Clarissa has a background in legal and professional publishing, as well as business journalism and holds an MBA from
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