The Chancellor of the Exchequer made announcements in his Budget on 19th March which will have an impact on the charity sector in Scotland, but some of the measures announced are recycled announcements from previous budget statements, while others will not come into effect until 2015 or later.
Gift Aid digital
In the Autumn Statement in 2013, the Chancellor announced that legislation would be introduced in order to allow non-charitable intermediaries to process Gift Aid reclaims online on behalf of charities. The Government has now announced that this measure will proceed but not until empowering provisions have been included in the Finance Bill of 2015. After that Bill receives Royal Assent in Summer 2015, the Government will consult on regulations. It is likely to be late 2015 or 2016 before intermediaries will be able to act on these proposed new regulations.
Charity donor benefits
At present, a donation to charity may not qualify for Gift Aid if the donor receives benefits in return, and if those benefits exceed certain thresholds. The rules on calculating donor benefits are complex and there is evidence that HM Revenue & Customs applies them inconsistently. HMRC will explore with stakeholders how the rules could be simplified with a view to passing legislation in a Finance Bill in 2015 or later.
Scotland Act and Scottish income tax rates
Under the Scotland Act 2012, the Westminster Parliament gave Holyrood greater control over tax raising powers, including the ability to set a Scottish rate of income tax. The rules give rise to complexities around Gift Aid donations and some other tax reliefs when applied to Scottish income tax rates. As a result, the Government will replace some key sections in the Scotland Act in order to simplify the method of calculating Scottish income tax, which should in theory have knock-on benefits for Scottish Gift Aid claims. This legislation is expected to be passed in summer 2014 and is to come into effect in 2016.
Small charities and Gift Aid
The Government recognises that small charities frequently do not claim Gift Aid or understand the other tax reliefs which they may be eligible for. A programme of outreach work between HMRC and the Charity Commission for England & Wales is proposed to encourage small charities to register for charity tax reliefs. It remains to be seen how this will be extended to Scotland, but it is hoped that the Office of the Scottish Charity Regulator (OSCR) will also become involved.
Cultural Gifts Scheme
The Cultural Gifts Scheme (CGS) allows taxpayers to obtain tax relief on a donation to the Nation of chattels, artworks, and similar objects of importance. At the present time, the annual limit for claims under CGS and the Acceptance in Lieu scheme (which allows gifts of items in return for relief from Inheritance Tax) is set at £30m. This is to be increased to £40m from 6th April 2014. Other amendments are proposed in order to deal with the interaction of the CGS rules with the old Estate Duty regime, from which there remain contingent liabilities flowing from earlier gifts to the Nation. This is to ensure that the benefit of the CGS rules would not exceed the benefit of a sale of an object on the open market.
Air ambulance charities
The Government will introduce a five year grant of £65,000 per year for air ambulance charities across the UK. The Government will also consult on a possible five year grant of a further £1m for inland safety boat charities.
Community Amateur Sports Clubs
As announced in the Autumn Statement in 2013, the Government will pass legislation this year in order to extend tax relief to donations to Community Amateur Sports Clubs (CASCs) which are made in cash by corporate donors.
Tax avoidance charities
The Government announced in 2013 that it would clamp down on charities which were created for tax avoidance purposes. Further consultation has been announced, following which further measures may be introduced in order to deter the use of charities for the purpose of tax avoidance by denying such charities any charitable tax relief. Any legislation to give effect to this will be passed"at an appropriate time".
Social investment tax relief
As the Government announced in last year's Budget, the Finance Bill 2014 will make provision for tax relief on investments in qualifying social enterprises. The tax relief will be given on income tax and capital gains tax liabilities and the rate of relief in relation to income tax will be 30% of the amount invested. The changes are to take effect from 6th April 2014 and draft guidance will be available from 27th March.
For advice on any aspect of the Budget and its impact on charities, or on charity law more generally, contact us at email@example.com.