The Budget 2016 and its effect on charities

This was, as the Chancellor remarked, “a budget for the next generation”. As a result, there was not a great deal included that would affect charities…or is there?

In the 2015 Spending Review and Autumn Budget, it was announced that the £15m raised as a result of the tampon tax would be used to fund women’s health charities, with the first £5m being specifically allocated to cancer charities (The Eve Appeal, Safe Lives, Women’s Aid and The Haven), and those that tackle domestic abuse. The Chancellor then invited other charities to apply for the residual funding with a deadline of 22 February 2016. Today he announced that funding has also been granted to the Rosa Fund, Comic Relief and Breast Cancer Campaign, amongst others. This is a great opportunity for other women’s charities to secure additional funding for next year.

The arts sector has been hit in recent years with the Arts Council cuts being passed on to the charities it funds.  As part of the Budget, the Chancellor announced that museums would receive tax credits for new exhibitions. There are a large number of small museums in the sector, and this news could make a big difference to them, helping to realise their plans for new exhibits sooner than they may have hoped, without making as large a dent in their unrestricted reserves as originally anticipated.

Business tax rates will be reduced from 20% to 17% by 2020. It is not uncommon for charities to have trading subsidiaries, and HMRC released revised guidance in October 2014 that places restrictions on the tax deductibility of Gift Aid payments, to the parent charity, made out of non-distributable reserves. This reduction in the rate of corporation tax may soften the blow for trading subsidiaries that now feel the need to retain reserves in their own companies, so that they are considered to be financially independent in their own right, ensuring good governance for the charitable group.

It was announced that it is the Government’s intention for all secondary and primary schools to have become, or be in the process of converting to academy status by 2022. This will mean the number of exempt charities will increase, and the new 2,500 academies will have to prepare statutory accounts, compliant with the Charities SORP, as applicable for academy schools for the first time.