The Chancellor of the Exchequer delivered his latest budget on 18th March 2015 – the final budget speech before the 2015 UK general election. A number of the announcements made in the budget speech will have an impact on charities.
Gift Aid Small Donations Scheme
The donations limit under the Gift Aid Small Donations Scheme is to be increased from £5,000 per annum to £8,000. The Scheme applies to charities which receive small donations of up to £20 each, allowing charities to recover Gift Aid on those small donations without the need for Gift Aid declarations to be signed. The impact on charities will mean a potential tax recovery of £2,000 (increased from £1,250) each year in addition to other Gift Aid reclaims. This change is to take effect in April 2016.
Gift Aid digital
The Government states in its detailed budget press releases that its “policy objective is to see Gift Aid claimed on as many eligible donations as possible”. To this end, as announced in 2014, the Government proposes to extend the ability to make Gift Aid donations to intermediaries on behalf of donors, in order to encourage as much Gift Aid recovery as possible. Draft legislation has been published to give effect to these changes.
The regime for claiming VAT refunds will be extended to cover hospice and palliative care charities, search and rescue charities and air ambulance charities, all as announced in the Autumn Statement 2014. The changes will take effect from 1st April 2015 and will also be extended to medical courier (“blood bike”) charities.
Charity Authorised Investment Funds
A new regime of Charity Authorised Investment Funds (CAIFs) will be created, modelled on the current Common Investment Fund regime. CAIFs will be charities and will be registered with the Charity Commission for England & Wales, but will also be regulated by the Financial Conduct Authority (FCA), giving a greater degree of regulatory oversight. An exemption from VAT on investment management fees will be possible under the CAIFs regime and existing Common Investment Funds will be able to covert to CAIF status. While it is unclear at present whether or not CAIFs will be able to be created in Scotland (and thus registered with the Office of the Scottish Charity Regulator), it is expected that Scottish charities will be able to invest in CAIFs in the same way that they may currently invest in English and Welsh Common Investment Funds.
Tax relief for orchestras
A new Corporation Tax relief of 25% is planned for orchestras, to commence in April 2016. This relief was recently consulted upon and the results of the consultation are due to be published shortly. Many orchestras are already registered as charities and are in general terms not liable to pay Corporation Tax, but this relief may be helpful to orchestras which either are not registered as charities, or which are registered as charities but incur some non-exempt Corporation Tax liabilities on non-primary purpose activity. The detail of the proposed relief is awaited.