Latest from HMRC and HMT
Below is the latest news and policy developments from HMRC and HM Treasury affecting the sector.
Why you should register your details for Gift Aid - an infographic from HM Treasury
To mark #GivingTuesday (3 December 2014) HM Treasury created a simple infographic guide to registering an organisation for charitable status and claiming Gift Aid.
Download the infographic as a pdf or access it on the HM Treasury Flickr page.
VAT Charges on Postage
This summer CFG wrote to the Treasury and HMRC Charities team jointly with the Institute of Fundraising regarding VAT costs for postage.
HMRC has now confirmed that charities with ‘single sourcing’ contracts for production and postage of their direct mail will have to pay VAT on these contracts from October unless they have a downstreaming arrangement. HMRC also clarified that VAT could be applied retrospectively to contracts, but in many cases the direct mail agencies will be liable.
Do check your contract with suppliers to check that you are not being adversely affected.
CFG letter to HMRC to clarify their position (pdf)
HMRC response (pdf)
US FATCA legislation
FATCA, the Foreign Account Tax Compliance Act, is a wide-reaching piece of US legislation aimed at combating tax evasion. It will require banks and other financial institutions around the world to identify and report certain information relating to US account holders.
CFG has engaged with HMRC to understand how FATCA legislation may impact charities. While we believe most charities will be unaffected, charities operating internationally may want to check how the rules apply in the countries in which they operate - see the CFG FATCA briefing.
CFG FATCA charity briefing
CFG FATCA consultation response
The legislation is still being shaped and arrangements are changing frequently, so the issues covered in the briefing may still be subject to change. The impact of FATCA on charities will also heavily depend on how banks choose to apply the rules once the legislation has been shaped.
CFG will continue to work with HMRC to address some of the final outstanding issues. For further information please contact our policy team at firstname.lastname@example.org or on 020 7871 5477.
TAXATION OF CONTROLLING PERSONS
The government recently launched a consultation on the taxation of controlling persons. It proposed that a provision be introduced to ensure that controlling persons have income tax (PAYE) and National Insurance deducted at source by the engaging organisation. CFG had some concerns about how this may impact on charities, where they are the 'engaging organisation', and submitted a response to this consultation. This response can be found here.
VAT COST SHARING EXEMPTION - GUIDANCE RELEASED
The VAT cost sharing exemption was introduced into law as part of the Finance Act 2012. The exemption will allow qualifying organisations to share certain eligible services without the VAT charge.
For those thinking of making use of the exemption, HMRC has produced detailed guidance explaining how the exemption can be enacted.
HMRC guidance on the cost sharing exemption
Revenue & Customs brief 23/12 announcing the measure
For more information on CFG's work in this area, please see the VAT section of the website.
GIFT AID SMALL DONATIONS SCHEME
In March 2012 HMRC published a consultation on the Gift Aid Small Donations Scheme. Announced in Budget 2011, the scheme is intended to allow Gift-Aid style payments on small cash donations of a value up to £20 on donations to the total value of £5000 per charity, per year.
CFG responded to the consultation on the scheme jointly with NCVO and CAF. This response can be found here.
The Small Charitable Donations Bill, containing the legislation for the GASDS, has now been introduced to parliament. We expect the second reading of the Bill in September 2012. However, a Public Reading Stage has also been launched which gives the public and charities more opportunity to feed in their views.
Our concerns with the Bill as it currently stands:
- The scheme is highly complex and is not accessible enough for those that need it most
- Provisions proposed significantly disadvantage certain types of organisations when in group structures. This disadvantage is linked to activity and donor group type; therefore there are equality concerns.
For more information please see the CFG and NCVO parliamentary briefing on the Bill
To make your views heard see: http://publicreadingstage.cabinetoffice.gov.uk/
On line filing of CT600 returns, computations and annual accounts is mandatory from 2011 tax year onwards. Charities who are affected should have received notification from HMRC by now.
In summary, documents provided to HMRC, now have to be translated from whatever they are produced in (Tax Software, Accounts Preparation Software, Accounting System, Excel or Word) into a computer language called iXBRL, using a device that looks like a spreadsheet called a taxonomy. This will then be uploaded to the HMRC and Companies House database.
In November 2010 HMRC announced that smaller charities with a combined income of £6.5million, will be able to submit their accounts in pdf format until HMRC has produced free software suitable for them. These charities will still need to submit their computations in iXBRL format. For further information please see Chapter 6 of the guidance notes on the HMRC website.
FIT AND PROPER PERSONS
The Finance Act 2010 introduced a new definition for tax purposes of charities and other organisations entitled to UK charity tax reliefs. The new definition includes a requirement that to be a charity an organisation must satisfy the 'management condition'. For a charity to satisfy the management condition its managers must be 'fit and proper persons', although there is no definition of this in the legislation.
The loosely defined term has raised concerns about additional levels of regulation and uncertainty for charities, as well as issues regarding the consequences, from a tax perspective, should an organisation cease to meet the conditions.
In February 2011, HMRC published the latest revised guidanceon the fit and proper persons test.
OFFICE OF TAX SIMPLIFICATION
The Chancellor and Exchequer Secretary launched the Office of Tax Simplification in July 2010 to provide the Government with independent advice on simplifying the UK tax system. The OTS was tasked with carrying out two initial reviews - a review of all tax reliefs and a review of small business taxation.
March 2010 - The OTS published the Review of Tax Reliefs: Annual Report. The reliefs relevant to charities are covered in Annex I. The report recommends that most all of the reliefs under review of relevance to charities are retained. The notable exception is Community Investment tax relief, however the Chancellor confirmed in Budget 2011 that it would be retained.