Minister pledges ‘fair and effective’ charity tax regime

Charities have been told the government is committed to working with them and to making the tax system for the sector work as fairly and effectively as possible.

In a speech to the Charity Tax Group on 22 June, Exchequer Secretary Damian Hinds said that as the minister responsible for charity taxation, he wanted to help charities make “every penny go as far as it can” and highlighted four key areas for action:

• giving intermediaries a greater role in how Gift Aid is administered, to make claiming Gift Aid easier. Mr Hinds said he hoped to informally consult on draft regulations this summer, ahead of introducing changes in April 2016
• continuing to refine and improve the Gift Aid Small Donation Scheme, with a review in 2016 of how the scheme’s rules are working
• finalising a new, simpler model Gift Aid declaration and guidance, to make it easier for donors to understand
• reviewing the complex rules about hospitality and gifts charities are allowed to provide to thank donors. Mr Hinds said: “In the near future, we hope to launch a call for evidence on how the system actually works in practice – with the aim of making the rules simpler and more effective.”

Mr Hinds added: “Our aim should be to make the tax system for charities work as fairly, and as effectively, as possible. What we cannot do is sit back and say: ‘We have a system in place, it’s working well, let’s keep it as it is’.”

Meanwhile, Chancellor George Osborne’s summer Budget contained measures with financial implications for charities. His announcement on 8 July included:

• introducing a new national living wage (NLW) for workers aged 25 and above, by adding a premium to the national minimum wage (NMW). From April 2016, the new NLW will be set at £7.20 – 70p higher than the current NMW rate and 50p above the £6.70 NMW rate coming into effect in October 2015

• raising the Employment Allowance – a rebate on employers’ national insurance contributions (NICs) – from £2,000 to £3,000 from April 2016. The Budget document said the move would help all businesses and charities, particularly smaller ones, with additional wage costs, with up to 90,000 employers seeing employer NICs liability reduced to zero

• charities will no longer be able to claim research and development expenditure credit (RDEC) on expenditure from 1 August 2015. RDEC was introduced in 2013 with the aim of encouraging more research and development by large companies and was never intended for universities and charities. The rule change follows a number of claims from universities, although HM Revenue & Customs estimates that fewer than 50 universities and charities are claiming under current rules

• organisations working with children and victims of domestic abuse could benefit from extra funding. There will be £30 million to further speed up adoption for the 3,000 children, while also paving the way for regional adoption agencies, and the government will also set up a £3 million fund to encourage innovative approaches to tackling domestic abuse, including refuge provision.

For more information on any aspect of charity taxation, or how the July Budget might affect your organisation, please contact Moore Thompson’s charity specialists.