What does the Budget mean for charities?

The Budget 2014 did not bring any surprises for the charity sector, mainly confirming previously announced measures or future consultations. However, overall the Budget should be seen as positive, with changes to help charities running costs, e.g. the changes to National Insurance contributions, and changes to make it easier to donate via Gift Aid. With the introduction of the social investment tax relief it would also be hoped that charities, along with other social enterprises, find raising funds slightly easier.

Stamp duty land tax
The government is to legislate to make it clear that if a charity purchases property which is to be used for charitable purposes, jointly with a non-charitable party, then the charity will be able to claim partial exemption from stamp duty land tax. The exemption will apply to the charities proportionate share of the purchase. This change will come into effect from the date the Finance Bill 2014 receives Royal Asset.   

Gift Aid
As announced in the 2013 Autumn Statement, the 2015 Finance Bill will include legislation to enable non-charity intermediaries to take a greater role in operating Gift Aid. The detailed rules will be made by statutory instrument, and there will be consultation before they are introduced. These changes are expected to be introduced in the Finance Bill 2015.

Small charities
The government has stated that they wish to encourage more donors to use Gift Aid on eligible donations and to register for the reliefs they are entitled to. To assist with this they will introduce a simpler and more joined up system of registration so that charities can jointly register with both the Charity Commission and HMRC and undertake 'targeted outreach work'  by a newly created outreach team at HMRC. Further details are awaited.

Social investment tax relief
As announced in the Autumn statement a social investment tax relief will be introduced with effect from 6 April 2014. The Budget announced that the investment income tax relief will be at a rate of 30%. This will be available to individuals making qualifying investments in qualifying social enterprises from 6 April 2014.  Social enterprises will include charities, community interest companies or community benefit societies.  It is expected that as well as equity, the investment could include simple debt if certain conditions are met.  There will be an annual limit per investment but the relief can be carried back to the previous year. A social enterprise will be limited to a fixed amount of investment over a three year period. There will also be a capital gains tax deferral relief, allowing an amount equal to the gain to be invested in a social enterprise with the gain being taxed only when the social investment is disposed of. Draft guidance is to be published on 27 March 2014.

Establishing charities for tax avoidance
The government is currently consulting on measures to prevent charities claiming charitable tax reliefs if they were established for the purpose of tax avoidance. It indicates that legislation will follow ‘at an appropriate time’.

Community amateur sports clubs
Legislation will be introduced to allow tax relief on gifts of money companies make to community amateur sports clubs.

Benefits provided to donors
The Budget confirmed that the government will undertake a review of the rules regarding benefits that can be provided by a charity to donors. These existing rules are complicated and the aim is to simplify the rules.

Cultural Gifts Scheme
The limits on the Cultural Gifts Scheme and inheritance tax Acceptance in Lieu scheme will be increased from £30 million to £40 million. 

If you require any additional information or if you would like to discuss further, please contact our not-for-profit team.

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