We have included this issue of Charity Tax Group Newsletter in this week’s SSNEL newsletter as it covers some interesting if not ‘taxing’ issues (could not resist apologies!). Charities can become a member for free or voluntary contribution using the link at the bottom of the newsletter.
CTG Newsletter (12 February 2021)
Charity Tax Group Expert Insight Training Sessions
In 2021, CTG has launched a new programme of monthly training sessions, open to all members, on topical tax issues for charities.
Next session – Business rates (24 February 2021)
The next session, on Wednesday 24 February 2021, will focus on business rates for charities. This will include a presentation from 4PM to 5PM, with the opportunity to ask questions after that. We are delighted that John Webber, Head of Rating at Colliers International, will give a presentation to members. John recently wrote a commentary for CTG on what charities should be concerned about with regards to business rates. His presentation will cover:
- Reminder of the Check Challenge Appeal (CCA) process
- COVID-19 Material Change Circumstances (MCC) update
- A recap of the Government’s Fundamental Review of Rates in England and response (or lack of it!)
- What can be expected from the Budget on 3 March
Previous sessions – MTD for VAT and Brexit
The first session, on 14 January 2021, focused on Making Tax Digital and included a presentation from Verna Gellvear, from HMRC‘s Customer Readiness Team. The meeting provided an overview of requirements for Making Tax Digital for VAT, with a particular focus on the “digital links” requirements, which will become mandatory from April 2021. The slides from the meeting are available here and a recording of the session can be viewed here (approx 1 hour). The VAT Notice (on Making Tax Digital) referred to by Verna can be accessed here. If you are interested in joining a follow-up session on digital links with HMRC (likely end of February/start of March), please contact firstname.lastname@example.org.
The second session, on Wednesday 27 January 2021, focused on the tax implications of Brexit for charities. It included a series of short presentations from representatives from HMRC, DCMS, BUFDG and Bates Wells. The slides from the meeting are available here and now include a detailed slide pack from HMRC on VAT and customs, which was unavailable on the day. In addition, a recording of the session can be viewed here (approx 1 hour 20 minutes). Andrea Marshall, Tax Specialist at BUFDG has also kindly shared with CTG members their Post 1 January 2021 guide to Imports. This is written with a university audience in mind but is worth a read.
Repayments of deferred VAT
In response to COVID-19 HMRC confirmed that all payments of VAT to HMRC due between 20 March 2020 and 30 June 2020 could be deferred until 31 March 2021, to help businesses manage their cash flow.
HMRC has now published updated guidance with instructions on how to repay deferred VAT:
If you deferred VAT payments due between 20 March and 30 June 2020 and still have payments to make, you can:
- pay the deferred VAT in full, on or before 31 March 2021
- join the VAT deferral new payment scheme – the online service is open between 23 February and 21 June 2021. Repayments can be made in 2-11 instalments depending on when you join the scheme.
- contact HMRC on Telephone: 0800 024 1222 by 30 June if you need extra help to pay
You may be charged interest or a penalty if you do not:
- pay the deferred VAT in full by 31 March 2021
- opt into the new payment scheme by 21 June 2021
- agree extra help to pay with HMRC by 30 June 2021
Please support the Charity Tax Group in 2021
Last year financial support from charities led to:
- CTG becoming a one-stop shop for all charities trying to understand COVID tax measures, grants and reliefs. There were over 100,000 page views of our information hub.
- The launch of a new charity VAT strategy to tackle both the £1.8bn cost of irrecoverable VAT and protect VAT reliefs worth £1bn that our dedicated research project has identified.
- Millions of pounds of savings from getting HMRC to change their mind on the VAT treatment of digital advertising.
- An active campaign for the protection of charity business rates relief that are worth £2bn a year.
- Gaining even more support from HMRC, national banks, third party platforms as well as charities for our Future of Gift Aid project. We are determined that Gift Aid will be fit for the future for every charity.
Already this year, we have briefed members on Brexit and Making Tax Digital and set out a clear vision for an improved tax system in our Budget submission.
However, we operate on a limited budget that belies our impact and the benefit that we provide to so many charities. We know that many charities are facing unprecedented financial difficulties and pressures on budgets. But without CTG those financial challenges would become even greater.
Please help us so that we can continue to help you – a contribution form can be downloaded here.
Making Tax Digital for Corporation Tax – CTG working group
HMRC recently launched a consultation on the design of MTD for Corporation Tax (closing 5 March 2021). A new commentary by HMRC on these plans can be read here. This consultation includes a specific section on how this might affect charities.
Question 19: Should charities, CASCs and other not for profit organisations, be within the scope of MTD for CT where they have income within the charge to CT and required to complete a Company Tax Return? If not, please explain why you consider an alternative approach is necessary for charities and what criteria should be applied to assess eligibility for this?
CTG representatives have attended a number of meetings with HMRC and expressed concerns about the scope of the proposal, as well as the practicality and benefit of charities being required to comply with MTD for Corporation Tax.
CTG will be responding to the consultation and is creating a small working group of charities and advisers to develop the response. This is likely to involve participation in two short meetings and comments on the draft response. To volunteer to join this working group, meeting first on 17 February 2021, please contact email@example.com explaining your interest and expertise in this area. You can also share feedback on the consultation questions via this email address.
Charity Tax Group AGM and elections (24 March 2021)
CTG’s virtual AGM will take place on 24 March 2021 from 16.00. This meeting is open to all, but only members/charities and professional firms that have made a financial contribution in the period 2020-21 will be entitled to vote.
At the AGM the Directors will provide a brief overview of recent activity, a financial update and confirmation of the appointment of Directors. In advance of the AGM, charity members are given notice of the following vacancies:
- Chair: John Hemming will be stepping down as Chair and we will be appointing his successor. The Chair also serves as a Director.
- Directors: The terms of two of the current Directors (excluding the Chair) are due to expire, creating vacancies, although they are both eligible to seek re-election. The CTG constitution provides discretion to the Directors to increase the number of vacancies in the event of interest from suitable applicants.
Nominations should be sent to the CTG Secretariat by 17 February 2021, via firstname.lastname@example.org, including a summary of the candidate’s relevant experience and interest in the role. Roles on the CTG board are subject to three year terms and can be renewed. Potential candidates must represent a charity that has made a financial contribution to CTG in the period 2020-21.
The outcome of this nomination process will be confirmed to members by 25 February 2021, with voting forms issued if relevant. The result of this process will be finalised by 19 March 2021 and the outcome confirmed at the AGM.
The meeting will also provide an opportunity for member to thank John Hemming for his immense contribution to the charity sector during ten years as CTG Chairman. The meeting will also set out CTG’s plans for the coming year.
Tax treatment of Coronavirus Support Payments
HMRC guidance now makes clear that for Community Amateur Sports Clubs (CASCs), charities and charitable companies, the receipt of Coronavirus Support Payments may be ignored for the purposes of section 528(1) ITA, section 482(1) and section 661CA(1) CTA10 [For reference, see Annex IV, Chapter 15 Small Trading Exemption guidance and chapter 2.22 of CASC guidance].
Payments received under employment-related schemes are ignored for the purposes of sections 662(2) and 663(2) CTA 2010 (see chapter 3.1 of CASC guidance].
Example 1: CJRS & Charity Small Trading Exemption
A small charity raises funds by selling items such as pens, pencils, mugs etc. Its profits from this activity ordinarily qualify for the small trading exemption and are not taxed. The charity furloughs some staff involved in the sale of goods but is able to continue to make some profits via online sales. The receipt of the CJRS grant does not count towards the incoming resources threshold and if other conditions are satisfied it may continue to qualify for the small trading exemption on its trading profits.
Example 2: Local Authority grant & Community Amateur Sports Club
A Community Amateur Sports Club receives a non-employment related Coronavirus Support Payment of £10,000 from its local authority. That receipt of £10,000 does not count as a receipt for the income condition test in section 661CA CTA 2010. However, as it is not an employment-related grant, it does count as a receipt for the purposes of Condition A test in sections 662(2) and 663(2) CTA 2010. As such the £10,000 local authority grant is to be considered as income and, subject to the other conditions, may be taxable
Round-up of other topical developments
- Job Retention Scheme claims: A reminder that claims for January 2021 are due by 15 February 2021. You can claim before, during or after you process your payroll. If you can, it’s best to make a claim once you’re sure of the exact number of hours your employees will work. This will mean you will not have to amend your claim at a later date. If you have already submitted your claims for January 2021 but find you need to make a change because you did not claim enough, you can do this until 1 March 2021. Find out how to get help and amend your claim.
- Publishing information on Job Retention Scheme claims: In January 2021, HMRC published a list of employers’ names who have claimed CJRS for periods from December 2020 onwards. From 25 February 2021 HMRC will publish the names, an indication of the value of claims and company registration numbers (for those who have one) of employers who make CJRS claims for periods starting on or after 1 December 2020. The published value of your claim will be shown within a banded range. HMRC will not publish details of employers claiming through the scheme if they can show that publicising these would result in a serious risk of violence or intimidation to individuals, or those living with them. To request for your details not to be published, complete the online application form. If you need to do this, HMRC will not publish your details until a decision has been made and you have been told. You will only need to apply once, as the decision will cover all CJRS claim periods starting from 1 December 2020. You must make the application yourself, it cannot be made by an agent on your behalf. From 25 February 2021, your employees will also be able to check if you have made a CJRS claim on their behalf through their online Personal Tax Account. There is guidance available on how to sign in or set up a Personal Tax Account.
- Charity support package: On 8 April 2020, HM Treasury announced £750 million of funding support to help frontline charities continue to operate during the coronavirus outbreak. The Committee will question senior officials at DCMS and the Charity Commission on how well the funding has been distributed and whether it is achieving its objectives. Evidence should be submitted by 8 March 2021.
- National Insurance contributions relief for employers who hire veterans: This new relief is available from April 2021. From April 2021 to March 2022, employers will need to pay the associated secondary Class 1 National Insurance contributions as normal and then claim it back retrospectively from April 2022 onwards. From April 2022 onwards, employers will be able to apply the relief in real time through PAYE. Further information on how employers will be able to claim it back will be published before April 2022. This relief is only available for 12 consecutive months from the veteran’s first day of civilian employment. This zero-rate can be applied up to the upper secondary threshold. Read more here.
- Bounceback Loans: The British Business Bank has announced further details of its Pay As You Grow facility, which helps UK smaller businesses that have taken out a Covid-19 emergency. Bounce Back Loan to manage their cashflow and have a better chance of getting back to growth.
- Northern Ireland VAT: The European Commission has submitted a proposal for a Council decision to apply a special scheme on VAT in Northern Ireland to avoid a hard border between Ireland and Northern Ireland.
- HMRC Employer Bulletin – February 2021: This edition of the Employer Bulletin covers updates and information on issues including: Coronavirus Job Retention Scheme; end of tax year reporting and actions which you need to complete; VAT reverse charges and changes to off-payroll working rules (IR35); and National Insurance holiday for employers of veterans.
- Recent CTG presentations: CTG is often asked to provide speakers for events. We cannot promise to fulfil all requests, but we will try provide a speaker where possible. To request a speaker please contact email@example.com.
- 3 February – ACF FIRM Network: Charity Tax Update. Slides can be accessed here.
- 10 February – Small Charities Coalition: Funding Talk – Charity Tax. Slides can be accessed here.
Please share details about CTG’s new monthly tax bulletin with colleagues and contacts
CTG has launched a new monthly bulletin “Charity tax: what you need to know”, which provides a high level update on major developments in charity tax. Regular subscribers to the CTG newsletter will receive this update, but please share it with any contacts, clients and colleagues that would benefit from receiving it – they can register here and the next bulletin will follow in mid-February. A number of charities have already encouraged their trustee and senior management teams to register.
Quantifying the impact of COVID-19 on Gift Aid claims
CTG is supporting the campaign for a temporary increase in the value of Gift Aid to assist charities during the COVID-19 pandemic and to incentivise donations for supporters. Falls in the value of donation income since the start of the pandemic have been well documented, but we are keen to gain a better insight into the material cost of lost Gift Aid during this period, focusing on donations received in the period April to December 2020. Please provide feedback here.
VAT and social media advertising by charities
The supply of advertising to a charity is generally VAT free, although some forms of digital advertising are currently subject to VAT. HMRC has now accepted that some digital advertising can be zero rated for VAT, following lobbying by CTG. However, HMRC continues to exclude social media advertising on the basis that it targets individuals by a digital address. CTG disagrees and is working with charities to consider a challenge to HMRC’s position. Charities are encouraged to support and fund this initiative – please contact firstname.lastname@example.org to receive a confidential briefing.