The autumn budget and a VAT report published
This month’s budget statement made no significant announcements regarding the charity sector. Indeed, the word “charity”, was only mentioned three times in 31,500 words of the Treasury statement. Funding for skills training and education were announced, along with several housing initiatives. The completion of the LIBOR funding programme for charities was also highlighted. Of wider impact is an intention to simplify the Gift Aid Donor Benefits regime was announced with changes expected from April 2019.
National Minimum Wage
Many social care providers have been hit by the HMRC approach to sleep-ins. This is where an allowance is paid for staff sleeping in at a care home and therefore being available to be called out. The NMW was not designed for these circumstances and it has taken some time for the unions, employers and the Government to decide how it should apply. HMRC has changed their approach completely and is now insisting that back pay for the last 6 years is due. The bill of £400m for social care charities may well cause some to become insolvent.
On 7 November the Office of Tax Simplification (OTS) – an independent office of the Treasury – published its first review of Value Added Tax. The report argues that after 40 years VAT has become outdated and proposes a number of changes to simplify VAT.
There are eight core recommendations, including:
- That the government should examine the current VAT registration threshold which, at £85,000, is one of the highest levels in the world;
- That HMRC should maintain a programme for further clarification of its guidance; and
- That HM Treasury and HMRC should undertake a detailed review of the reduced rate, zero-rate and exemption schedules.
In the budget statement the government rejected the proposed change in registration threshold for at least 2 years which will be a relief to many charities as this could have significantly increased their compliance burden.
For more information, please contact Sudhir Singh, Partner and Head of our Not for Profit sector.