News from 2014 budget statement

Chancellor of the Exchequer George Osborne announced his 2014 budget on Wednesday 19 March, including several items of interest to the voluntary and community sector.

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Social investment tax relief

The new social investment tax relief will be set at a 30 percent rate, and will be worth £35million a year to social investors by 2018/19. The relief will offer an income tax rebate to those making unsecured investments in asset-locked bodies and in social impact bonds.

The tax relief will be available from 6 April, for organisations with a maximum number of 500 staff. Organisations will be able to receive up to £290,000 over three years under the scheme.

The 30 percent rate is higher than the 25 percent for 40 percent rate taxpayers reclaiming when they donate to charity and lower than 31.25 percent for 45 percent rate payers using gift aid.

The government is currently applying to the EU for state aid approval in order to allow the relief to apply to larger amounts.

Other tax relief

The Budget document also confirmed that the Finance Bill, which follows the Budget, will include legislation to make it clear that charities get relief from stamp duty land tax if buying property jointly with a non-charity. It will also include legislation to allow tax relief on gifts of cash from companies to community amateur sports.

Gift aid

The government will encourage more donors to use gift aid and help ensure smaller charities are registered for the reliefs they are entitled to.

The Budget report also restates the government’s intention, as outlined in the Autumn Statement, to bring in legislation to allow non-charity intermediaries to play a greater role in operating gift aid, which will be set out in the Finance Bill 2015.

An outreach team is being created in HM Revenue and Customs to help more small charities benefit from gift aid and the Gift Aid Small Donations Scheme, which was introduced last April to provide a gift aid-like relief on up to £5,000 of small donations each year.

The government will also provide a portal for charities so they do not need to register with both the Charity Commission and HMRC in order to claim charity tax reliefs, and will look at the donor experience of using gift aid to find any barriers to take-up.

The Treasury consulted last year on proposals to modernise gift aid and make it easier for charities to claim tax relief on donations made online or by text message. Simplifying the gift aid declaration and a universal gift aid database that would enable donors to make a single declaration were among the proposals considered.

Donor benefits

The government will review the rules around the benefits charities can give to donors.

Current rules mean that donors can only receive benefits worth five percent of the value of their donation, or £2,500, whichever is lower, in exchange for a donation.

A donor receives a benefit if they receive any item as a result of their donation, ranging from cheap or free tickets to a token such as a poppy, but the Charity Tax Group has outlined a number of uncertainties in the current rules which need clarification.

The Charity Tax Group has stated that a clearer test is needed to establish whether a donor received a benefit in consequence of having made a donation. It also said it was often not clear to charities how to value benefits donors received and that charities had complained that HM Revenue & Customs’ advice on the subject was inconsistent.

HM Revenue & Customs has agreed to convene a subgroup of the Charity Tax Forum to address the issue.

Tax avoidance schemes

Users of charity-based tax avoidance schemes will in future have to pay any disputed tax upfront.

Libor fines

Funding worth £10million made up from Libor fines will be awarded to charities and organisations who deliver social action opportunities.

The fines, which originally were only to go to military charities, will be delivered through the Youth United Network, a charity which will see funding delivered to organisations including the Scout Association, the Army Cadet Force, the Fire Cadets and the RAF Air Cadets.