The general reaction from charity commentators is that there was little in the Budget affecting the sector apart from the additional funding for social care. Much has been made of the fact that stability can be a virtue,
however, there are some developments which will still have an impact on charitable organisations.
Making Tax Digital ("MTD")
The government will provide an extra year, until April 2019, before MTD is mandated for unincorporated businesses and landlords with turnover below the VAT threshold. This will provide them with more time to prepare for digital record keeping and quarterly updates.
Employers can choose how to pay and incentivise their employees but the tax treatment of these can vary. The government is now looking at the taxation of benefits in kind and employee expenses. This includes consulting on the tax treatment of employer-provided accommodation. It will include proposals for when accomodation should be exempt from tax and how to support taxpayers during any transition. This will have an impact on those charity employees who may be in receipt of employer related accomodation.
Income tax and National Insurance
The increase in the personal allowance by £500 to £11,500 coupled with an increase of £2,000 to the higher rate threshold, will cut income tax for some of the lowest paid workers in the country, many of whom work in the voluntary sector.
Research and development ("R&D") tax review
The government’s green paper on Industrial Strategy reinforced their ambition to drive up the level of private investment in science, research and innovation. The review of the R&D tax regime has concluded that the credits regime is an effective support for innovation. We can only wait and see whether the scheme can be extended to non-university charities.
The overhaul of business rates has led to some discrepancies in the relief available, with many charitable trading subsidiaries potentially being worse off. The government has announced that it will provide a further £435m of support for businesses facing significant increases and it is welcome that this has been extended to trading subsidiaries of charities.
The government has agreed further devolution to London, as a result of which, the government and its London partners will agree a second Memorandum of Understanding on Health and Social Care.
Insurance Premium Tax ("IPT")
The government will introduce anti-forestalling provisions and increase the standard rate of IPT to 12% from 1 June 2017; a substantial cost increase for charities where insurance can be a significant business expense.
Tampon Tax Fund for women’s charities
A range of women’s charities across the UK, including those that tackle violence against women and girls, will collectively benefit from £12m as part of the 2016-17 round of the Tampon Tax Fund.
Value Added Tax ("VAT"): Registration and deregistration thresholds
From 1 April 2017 the VAT registration threshold will increase from £83,000 to £85,000 and the deregistration threshold from £81,000 to £83,000.
Stamp Duty Land Tax
As a result of consultation, the government will delay the reduction in the filing and payment window until 2018/19.
Corporation tax relief for museums and galleries
As announced in 2016, the government is introducing a new tax relief for museums and galleries which develop new exhibitions, including those that are toured. The rates for the relief will be 25% for touring exhibitions and 20% for non-touring exhibitions.
The relief will allow museums and galleries to claim a credit worth up to £100,000 on exhibitions that are toured and £80,000 on non-touring exhibitions.
The maximum credit allowable is the equivalent of qualifying expenditure of £500,000. Following consultation on the draft legislation, the legislation will be revised to allow for exhibitions which include a live performance as part of the exhibition (but where a live performance is not the main focus of it). The measure will take effect from 1 April 2017.
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