George Osborne announced a number of changes in his budget speech delivered on 18 March 2015, but what impact will these have on the charity sector?  The headline issues and future changes for the sector to be aware of are discussed below. 

Financial support for charities

Grants

The government has announced that they will be providing a grant to support charities providing rapid response vehicles for medical purposes.  A further £75 million from the LIBOR fines imposed on banks will be given to support military charities and other good causes.  Finally, £40 million will be given to help fund vital roof repairs to listed places of worship from 2015 to 2017.

VAT refunds

A measure introduced by the Finance Bill 2015 (a piece of draft legislation which received Royal Assent on 26 March 2015 and includes a number of priority measures announced during the Budget) will enable the following charities to claim refunds on VAT incurred on the purchase of goods and services, and the acquisition and importation of goods from outside the UK, used for non-business activities:

  • UK search and rescue and air ambulance charities;
  • Palliative care charities; and
  • Medical courier charities whose main purpose is to provide a free, out of hours service to the NHS, transporting urgently needed items such as blood platelets, samples for analysis, patient notes, small medical instruments and donor breast milk.

This measure will give these charities broadly the same level of VAT recovery as is currently afforded to the established emergency services and NHS bodies.

Tax cuts

From 1 April 2016 the Budget will provide creative industries, to include charitable orchestras, with a tax relief rate of 25 per cent.  The value of this tax saving is estimated to be £35 million over the next 5 years.

Gift Aid

Digital Giving

A measure included in the pre-election Finance Bill will enable non-charity intermediaries, for example Just Giving, to play a greater role in Gift Aid.  The measure will amend and extend the rules in the Income Tax Act 2007 to make it easier for charities to claim Gift Aid on donations made through intermediaries via digital channels, for example by text message or online.

Gift Aid Small Donations Scheme (‘GASDS’)

The purpose of GASDS is to reduce the administrative burden for charities wishing to claim tax relief on small cash donations of £20 or less received in circumstances such as bucket collections or collections during a religious service.

The government plans to introduce secondary legislation to increase the maximum amount of small cash donations that a charity can claim top-up payments for in any tax year from £5,000 to £8,000.  The effect of this is that from 6 April 2016 the maximum top-up payment that a charity or community amateur sports club will be able to claim will be £2,000 (currently £1,250).

This measure is not included in the pre-election Finance Bill, but depending on the outcome of the general election on 7 May 2015, it may be included in future secondary legislation.

Charitable Giving

Reduction to the pensions lifetime limit

From April 2016, the lifetime allowance (i.e. the maximum amount that an individual can save towards their pension tax free) will be lowered from £1.25 million to £1 million.  Whereas in the past  wealthy individuals have used pensions as a means of reducing their tax liabilities, this change may provide an opening for the charity sector.  Given that the pension tax saving route will be reduced, wealthy individuals may instead seek to make more charitable donations as a means to reduce their annual tax liability.

Comment

The overall growth shown by the economy over the past year has led the Government to include fewer austerity measures in the 2015 budget.  This has the potential to greatly benefit the sector by encouraging more public confidence and increased charitable giving. In addition, Government policy and measures included in previous budgets have made charitable investments more attractive and, in light of the measures discussed above, the sector should be able to benefit and continue to grow.